Hi guys, I've just gone through this very process myself with a simular budget. I spent weeks looking through eBay, Gumtree, Auto Trader and Exchange of Mart.
There is a vast selection out there, a lot of which is pretty ropy! Like Smallzoo I had a limited budget too of about £1000 (I have a second car I need to keep for a while so couldn't PX) needing a bigger car for work I decided to go for the a Wagon Sport, plus these have a Hi and Lo gear ration selector too which could be handy for the odd off-road use. (Oddly the saloons and all turbos do not have this Hi Lo ration selector?)
Anyway, I eventually found a dark blue wagon 2001 facelift version on an X plate. Pretty clean, most service history, loads of receipts Cam belt has been done twice but not the clutch though. Rust bubbling through on one wheel arch. Took it for a test drive seemed pretty good for the money so made an offer of £950 and got the car.
Now having had it for a few days I've realised that as its 14 years old it's showing it's age, the power is down from the engine some what and the suspension is pretty squidgy, plus the rusty patch on the rear wheel arch is going to cost about £350 to sort.
So I guess what I've personally discovered is if you get an old car of 10 years plus - it's really going to show it's age regardless of how well it's been looked after. All that said, I'm pretty happy with the car as it's big enough for what I want, it's got a lot of charactor and it's the last of the original shape which is my favourite Impreza before they changed to the Bugeye.
Do I want to spend another £500-£600 on replacing/upgrading the suspension and £300-£450 on trying to upgrade the engine - maybe I don't yet know but if I sell it I want get that money back in the sale!
Anyway I hope this was of interest and of use to anyone? - Cheers