I have not seen the ad in question, but imo, I would not pay more than £500. It is the lack of MOT that is the killer. I would then only take a chance after giving it a thorough inspection.
Price guide
£2K - £3K - mint
£1K - £1.75K - below to average mile, low owners, long T&T, excellent or very good condition, needs nothing doing
£700 - £1K - T&T, average or above average miles, some minor faults eg, isolated surface rust, wheels need a refurb, seats worn or small bolster tare, may need a good service, BUT mechanically sound and drives OK.
Obviously a 16v will be near the top of each price bracket. Mods dont often make any difference to the asking price. At 16+ years old it will never be perfect.
Other things worth a look
1) check rear wiper works (easy to fix)
2) check blower works on 1 & 2 (easy to fix)
3) check footwells are not wet
4) suspension knocking on uneven roads
have a read here:
http://www.matey-matey.com/golf_buying_guide6.shtmlDont worry about mileage if it drives OK
good luck, these cars come highly recommended

ps. I would be interested to know what others think to the prices
