In the condition described, I personally would pay $5,000 max. Another collector would probably go into the $7,000 range. Another may even crack $10,000. It all depends on the patience of the seller.
Once fully working, and considering the original condition, your friend's Mermaid would reach 5 digits easily. $15K-$18K in my opinion.
The $1,000 price quote from the "expert" is way off. I would question that person's "expert" credentials and/or his honesty.
If you can get pictures, please post them. It's not every day that we get to see a Gottlieb Mermaid, let alone one that is in nice, but non-playing condition.