You know, I was thinking that we just have our mechanic go over it, cut out all the rusted sheet metal and replace with new sheet metal. Repaint those areas, hes good at patching & painting and silver should be easy to do it with. Next fix that antifreez leak, even though I didn't see or smell one. Fix the bad bearing in the rear and swap out the possible bad CV shaft. Put the stock muffler back on it (its in the trunk). Then it needs new inner wheel wells on the front. If we can find a good deal, a new carpet and a new 2002 or 2003 WRX drivers seat, or have an upholsterer fix the foam in the current one. Then it needs a thorough cleaning inside and a good buff outside to hide most of the scratches. The buffing should be pretty simple because the scratches in metal really aren't horrible, and its silver. It would probably be worth it to get a new front bumper cover because little pieces of this one are missing (tabs where the inner wheel wells connect). I think that will be enough for the first 6 months to a year, then he can worry about prepping and repainting with other colors if he wants. The body of this car has a lot of little ripples and dents in the sheet metal that would need some TLC if the car was to be repainted, not unlike the cavalier that he did before it.
Also, I might add that even though it sound like a lot, this cars mechanical workings seem to be in GREAT shape. I have never seen a Subaru from this era with this many miles that didn't make any lifter noise or piston slap, but this one seems to run as smooth as my 2009 does. The transmission seems to be in good shape too, but I have yet to drive it.