I mainly collect railroad grade pocket watches, but some day I would like to own a Hamilton 4992B.

The 4992B is intriguing and would be a worthwhile addition to any collection. A civilian industrial grade machine that was quickly and successfully adapted to military use.

How many were produced?

What accounts for the relatively high price considering the number that were produced?

Prices are not entirely related to supply and demand. I think that hype is a larger factor in pricing of timepieces - as well as many other kinds of collectibles. The more that is written about something, the higher the asking prices climb. Creating a 'buzz' about something among collectors will generate ever higher expectations on what you can sell something for. Eventually high prices become a self-fulfilling prophesy after people begin paying that amount.

You are correct that many of these were made, but as Lindell so astutely mentioned, these were built like tanks and so very few have worn out or were thrown away which means there appears to be high survival rate of these compared to many other military timepieces. The result is they are not difficult to find for sale, though they are priced quite high relative to most other military timepieces.