I'd personally say $500 is probably top end pricing for a potentially bad cylinder, but it's ultimately a choice you'll have to make.
If you don't have much experience with mechanics, and don't have any tools, then you'll need to factor in time and purchasing tools, if you can handle the frustrations that come with it, etc. If you're mechanically inclined but just never worked on a motorcycle and want to learn how, then this could easily be the right bike for you. Especially if he's asking $500, then you can probably work him down some more.
Personally, if I had the room, I'd probably go for it. But then again, engine work doesn't scare me.
Turbos, Hondas, 4-bangers, what could go wrong?
Shiny: [...] Considering the weather you've had to put up with I'd say you get an Iron Butt award and a Frozen Nipple trophy to go along with it. First time I've ever posted the word nipple... it ends here.