Too much, to me, means more than enough of something. For the sentence to work it'd be "it/that costs too much" whereas much too, again to me, implies something is beyond some other thing i.e. it's beyond (much too) hot/ cold/ expensive/ cheap etc... Hope this helps
Should "That is awfully expensive?" work as well?
Altfor and awful sound like they came from the same root word too.
Awful = fryktelig. So it's a strong term that you can use in circumstances like that but altfor is more neutral and better translated into phrases like much too, way too
Aweful is a contraction of awe and full meaning full of awe. It can indicate that one is amazed and in awe at how bad/ good etc... Is. Today it has become a byword for simply bad, just as bad/ sick etc can sometimes mean something is great. It's aweful when you see the chef's finger poking out of your burger whilst he's being rushed to hospital missing said digit. But technically you are aweful with regards to it.
The neuter form is the same as when expensive is used as an adverb. You will mostly be able to tell if there is a neutral expression, "it" is expensive. Det er dyrt. "This smells expensive". Dette lukter dyrt.
But if your "it" clearly points to an item that is -not- a neuter noun, you need to find the appropriate ending. "I can't afford that car, it is too expensive." Jeg har ikke råd til den bilen, den er for dyr. Bil and den are both masculine, dyr being the masculine form. "The plane tickets has become so expensive". Flybillettene har blitt så dyre. Flybillettene is plural, dyre is the plural form.