I think your plan sounds pretty good. I'd personally lean towards a simple electical problem being the culprit, but I've been wrong before. I also do not like when people say "I was told it . . ." because there have been plenty of times that the information was wrong and the new seller just didn't know, or decided not to check so they wouldn't 'really' be lieing. If the electrical worked, I'd say the $1200 would be a good deal. If I were you, I'd spend a some time looking for obvious electrical problems - you might easily spot something he missed.
I bought my 88 TBI Blazer for $900, but I've put a similar amount into a lift, tires, maintenance items and so on. The biggest issue I've had is RUST! I looked underneath it and it didn't look bad, felt the inside of the rockers and a around wheel wells with my hands and it felt solid. Since then, I realized that undercoating can hide a ton of rust. I knew the corners below the rear seat needed some attention, but after pulling the interior, I discover numerous rotted sections in the floor. Also, found holes in several body support areas and even in the rockers - there had been enough there to feel solid, but once you start tapping or grinding, the situation changes quickly. I feel I would have been better off spending more time and money while shopping around and getting a better starting point, but I'm not disappointed either.
If this truck is built similarly to what you had in mind, then it's not a bad deal. Cheap (Rough Country) lifts are 250, plus another 50 for extended lines, plus 300 - 400 for the tires and wheels and you're getting the truck with other stuff for a couple hundred. However, if you have a slightly different direction in mind, it may be better to look elsewhere.
The thing to keep in mind when people say it's worth x amount in parts is that it takes a lot of time and effort to sell said parts and you might not get as much as you want for them. Then there's some people wo thin just because they invested a good bit of time and money in something that it makes it worth a lot - even though it doesn't run or drive so you can verify that the work was done right. I guess I got a little off topic there . . .
