Hiya,
Before I reply to your post on painting the arches I have to comment on the price.
I'm new to MG's but not new to fixing or restoring cars and for £5k that car should be rust free! 
Others may agree or disagree with me but it seems way overpriced to me.
I bought a 2002 TF135 this September with 34k miles that is totally rust free both on top and underneath so to me it looks overpriced.
At 5k it should have no rust and a perfect gear lever gaiter.
I'm sure others will make their own observations to help you.
Before you part with cash get a feel for what others think.

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