It is hard to answer because the question has two components to it - Logical and emotional. I couldn't begin to gauge your passion for the car. Strictly on the logical side, the answer would be yes, take the $1,000.

If all of the tech's diagnosis is correct, there are going to be other mechanical issues once the car is running. Could be a transmission, differential, electrical gremlins, or numerous other engine issues etc, etc. The head gasket alone is a nightmare on an SIII that has been sitting for years. You could probably do better than $1,000 parting it out, which is probably what the tech is thinking, but then you have to have the room to do that.