Personally, I think it depends on the value you place on the machine. If you really want it, and plan to keep it, $1000 may be okay because you know you can get it working. If you plan to sell it later on, you will likely never get your investment out of it.
I agree, with the others in that a non-working Paragon should never be worth $1000. But, if it's a machine I really want, I might pay more for it.
On the other hand, if you hold out, the guy will likely lower the price eventually because there aren't many (if any) who would pay $1k for a non-working machine that old.
If you really wanted to push, you could respond that you agree that it is worth $1000, but that's only a "working, very good condition" machine.
I love it when people see an 'antique' machine go for a certain price and they automatically assume that their non-working POS is worth the same as a working (good - very good) machine.
G