I have a 960 that I paid $3255 with new tires, clutch, and brakes. Also got a 60" box blade, 5' bush hog, and boom pole for that price. It runs like a champ, starts in 30 degree weather without using the choke but has a little blow-by when working hard and the power steering cylinder leaks at the valve so the belt is off the pump. It also has the aux hydraulic valves under the seat.
Someone painted it the wrong colors and the sheetmetal is straight but pretty rusty.
I use it every day and it's pretty good on gas too.
The original asking price was $3500 but I talk the guy down to $3055, then gave him $200 for the bush hog.
I would question why the oil pump got replaced on the 960 that you are looking at. That indicates to me that there is an unresoved lubrication system problem that can result in the total destruction of the engine.
The head gasket deal is another area that raises concern.
Offer the guy $2500 for it as is, if you are good at doing your own engine work. If you have reservations about your mechanical abilities then walk away, as paying a shop to straighten out the problems can very well cost as much as the asking price.
One more thing, don't run it unless you are absolutely sure that it has oil pressure. From your description I have a feeling that the guy has done that and there may be serious damage already done to the crankshaft, rod bearings, and cam shaft.
Good luck, let us know what you decide.
Ford960
PS, What front wheels does it have? I've got the wide front on mine.