Newbie,
The price is too high for what it needs. I picked up my 92 with 171K, in pristine condition with no problems for $7800 about a year ago. $5000 is more like it, but the leaks concern me. Toyota's shouldn't leak in any major way. A 350 conversion would be nice, but be prepared for quite a bit of work, and budget at least $4000 for a crate motor, fuel injection, adapters and accessories. If you want to hook up the factory air conditioning, budget another $1000.
Even then, you'd still have to reseal the transfer case...
Heck, offer the guy $3500 to $4000 with all the issues and bank the rest for needed repairs.
Don't let the 93+ crowd get you down, the 91-92 landcruisers are very comfortable and capable rigs, and the 3FE will run darn near forever with proper care. Mine has 182K on it, and others have 229K+ miles on these rigs with no major problems.
Junk failed to tell you he's already been through two engines and at least on his second tranny....but I have a feeling it's just his driving style.
Depending on where you live, one of us may be willing to check out the rig with you...
-H-