I got my pool for "free" last year. 300.00 dollar liner, 100.00 worth of sand, and a priceless amount of sweat and labor (self install). For me, it was worth it but, this pool was in pretty good shape. It was not sunk into the ground and the bottom rails were still in only fair shape so I would say you are correct that the rails on the one you are looking at are probably trash. The bottom of the siding may also be beyond repair. I had to put some sheet aluminum to cover some small pinholes, they were near the bottom so the sheet slid into the bottom rail and it worked out nice. My intentions were to have this pool for a few years and if I still used it, buy some thing new but while I was going through all that work to install I really wished it was for something brand new.

Other problems you may run into: The screws that hold the top rail on, mine had a few that were so bad they broke upon removal, I was able to get neopreme replacements at HomeDepot so not such a big deal.

Keep this in mind, last year I was at Namco and they had a 3,000.00 floor model on sale for 1,200.00, very nice unit compared to what I have. It's a long stretch from 500.00 to 1,200.00 but may be worth concidering.

Edit: In my area, a pool actually depreciates the homes value.

Wayne