Do it. I've driven an 89 in both turbo and non- variants in stock form...it may not look like it on paper, but the 7mgte with an r154 behind it is much faster, and quite a bit quicker than the NA/w58 combo. As far as daily drivability, though, you might want to consider staying NA; the turbo model uses a bit more (and more expensive) gas around town. Staying out of boost is both not very satisfying nor gas efficient.
If it was me...$500 for a parts car is really hard to pass up, especially when a lot of our stock motor parts are fairly expensive to replace ($80 for the accordian hose?! Out your goddamn mind...). And, that's a WAY cheaper price than getting a JDM turbo take-out, plus transmission, plus ecu...the list goes on, but I won't. If his parts are in better condition than yours, I'd do it.