This thread caught my eye. I am also looking at an ST165 and I have a few concerns.
Celicas in general are known for rusting. Depending on where you're from, watch out for that. I live in Maine so because of the salt on the roads in the winter cars tend to rust out fast. Celicas rust from the inside out. That is because they are undercoated but the inside is not so the floor boards are going to start rusting and you won't notice it until it gets soft ie: until it's too late! The ST165 that i'm looking at is rusting under the pax side seat so I need to go check it out and see how deep it is. There is a LOT more rust than meets the eye!
When you're buying an old car (ie:'88) you need to consider that you'll have to replace all the rubber. Call Napa up and get an estimate on all the tune up parts, belts/hoses, an gaskets. Depending on your mechanical ability, you should replace as much as possible. Also, Ask when the T belt was replaced last and if the water pump was replaced at the same time (it should have been).
As for price... Yes this car is rare but it depends on the condition it is in. You cannot get an inspection sticker with rusty holes in the floor boards! In that guy's situation I would say 4000 is an ok price considering the condition of the car. However, with the new information about the engine smoking and so forth, that puts the price of the car WAY down. I would say it is still worth 3000. It IS garage kept.
Ok I'll stop rambling now.