[ZilverZilvia]

Sounds like valve float to me. The piston starts to hit the valve, or the valve stem "floats" and then gets hit again by the cam when it revolves.
Bad news. Sounds like that engine wasn't taken care of and red-lined all the time.
You could take off the head and see how badly damaged the valves and pistons are. If they aren't TOO bad, you could replace the valves, springs and cams, and it should be fine, with more power to boot. That cost some cashmoney though, and since your friend is looking into getting a "cheap" car...that will end up being very expensive and not cheap at all.
STAY AWAY!