The transfer box problem is nothing major, very common the shifter seizes up from lack of use. You can get underneath & blast the linkage with penetrant & it should free off. The LT230 Transfer boxes are probably the toughest component of the truck. The main thing to check for with them is if you get a loud "clack" noise when shifting between reverse & drive.
I would be more concerned about rot which has already started according to the description, if it's already showing what he describes as discovery rash, this is where the steelwork is in contact with the aluminium body panels & causing electrolysis. I bet the underside (sills, rear crossmember, inner wings etc) are starting to go. A big problem area is around the rear seatbelt mounts in the rear wheel arches & also where the C pillar attaches.
Also budget for a top end rebuild of the engine, at 120000 miles it will definitely need a new cam & lifters, timing chain & gears etc. By 65000 these are starting to show wear on the Rover V8. Although the 3.9 blocks are probably the best of the bunch.
Without all the kit on it, a V8 Disco of that age is probably worth around £1200.
If he's a good mate I'd try & talk him out of it, because of how these things rot I wouldn't reccommend one to anyone.
