It does sound fishy - but why in the world would someone be willing to trade a stolen bike for one worth much less? That makes no sense. If they want to be rid of it, just leave it by the side of the road or something...why risk contacting people on Craigslist at all? Maybe it's legit but it's a really old Allez, or maybe there is something severly wrong with it (another good reason to meet at an LBS).

The whole thing certainly sounds extremely odd though. Definitely let us know how it turns out...now I'm curious!