I collect old bikes, currently have a 75 and 77 CB550, a couple other sohc's, plus a bunch of other japanese vintage rides. Almost all of my bikes start out in that condition, barn finds or projects that were abandoned, etc. Its a toss up. Usually I will kick over the engine or touch a battery lead to the starter to make sure it isnt seized. If the engine sounds like it has low compression or a blown cylinder, I will do a compression test. If the engine is not seized and has decent compression, I'll offer up to $500 for it (especially a nice looking one like that) If it is seized, then maybe $1-200, always good for parts or parting out on ebay. If you are patient then that bike could fetch over $1000 all parted out. Some guys bust free seized engines, I used to but now I dont really bother with it cause its a pain.
However, I think a nice bike like that is worth putting the time and effort into. Those bikes are getting really rare to find, and I think they end up neat as hell when they are done. It would make a killer cafe racer, but it is so complete and good looking I would keep it stock and really enjoy it.
This bike is almost as simple as it gets. It is a great bike for a first restoration. Parts are fairly available on ebay and this forum, plus the sohc forum.
Remember that any motorcycle can be fixed. Even if you have to hunt down an engine and toss it in there, in my opinion the effort would still be worth it. Any punk can go out and buy a GSXR or a Ninja (lol a punk such as myself), but vintage riders are a classy bunch. I would highly recommend buying this bike.
For a little inspiration, here's my two bikes:
http://www.youtube.com/watch?v=VShCdEiTS3g
http://www.youtube.com/watch?v=CIpgWlBR-hA
Best of luck