Zrxpilot, it's kind of diffcult to say without pictures. What I can say is check to see that the rods slide and spin smoothly. If they do, then the surface rust won't be much of an issue once you've removed as much of the surface rust as possible and lubed the rods and bearings. If the rods don't spin well, then you're going to be looking at another $250 payout in a worst case scenario. Peeling formica is not an issue really. Most Tornados will in time. You can simply add glue to reapply the formica. As for the top edges, you can remove the old formica and reapply some new strips. Easy job. But CHECK THE PLAYING SURFACE (the pitch) WELL! This is a deal breaker. A warped surface (from a spilt drink or excess humidity while in storage) will cause the ball to lose trajectory and you won't enjoy playing. And while a surface can be replaced, it's apparently a bitch of a job and they're costly. Also check to make sure there is no mould in the inside of the cabinet.
Not sure what you meant by "balls dropped on the ends and not the center".
Otherwise $125 is not a bad price for what you've mentioned is wrong with it. A bad pitch though, and it's "no deal".
Good luck