For $1K+ with those problems, yeah, walk away. Don't know about St. Augustine, but even where I am in mostly-landlocked western PA, these "back yard" boats are not uncommon. The market isn't small (there are a lot of these boats out there) but it's also not large, and they're not really a "commodity item". I've been looking around a bit lately, and been debating various upgrades, etc. and weighing against getting a newer boat, so let me see if I can boil it down a bit.
To give you an idea, I got my '81 H16 5 years ago for $750 with no soft-spots (although the hulls have inspection ports which is a telltale sign of previously-repaired soft spots), a mostly-roadworthy trailer, 2 sets of blown-out-but-recreationally-usable sails, an ever-so-slightly bent mast (that has been getting worse), and enough "stuff" (spare parts, rigging, etc) to sail on and off for ~4 years without major investment. I would say for the first 4 years I had it, I put in maybe $500 total. In hindsight, I feel that this was a pretty good deal. This year I put ~$500 into overhauling the trailer (I'm paranoid about trailering) and this winter, I'm planning to re-glass the bottoms of the hulls, as one has started taking on water -- it's not severe, but it's not minor either, and it's only on one side, so it puts the boat out of balance -- anyway, it's time to fix it. (I've also replaced the mainsheet blocks, and done some other assorted fix-ups.)
In terms of "whole boats", most everything I've seen on Craigslist considerably under $750 has been an obvious fixer-upper/for-parts boat. If you can find a boat with soft spots but a decent rig, and another boat missing most of its rig, but with solid hulls, both on the cheap, maybe you can put together a FrankenHobie. But that'll be a project.
I also see a fair number of delusional $1500+ listings on Craigslist for early 70s to early 80s boats that have obviously been rotting in the back yard for years with no protection from the sun, and which mention no redeeming factors. (i.e. $1500 boat might be an OK deal if the thing has a mostly-unused, indoor-stored rig, tramp, and a crisp set of sails.)
If you're going to spend $2500+ then you really want to look for 1993+ hulls. AIUI, they got considerably lighter in 1993.
If you've got even more money than that, but not enough to go full retail, you might consider calling around to dealers in low-traffic areas. I know one guy in our little local group got a hell of a deal on an H16 that our local dealer had sitting in his warehouse for 3 or 4 years.
This is anecdotal, to be sure, but I have seen very few boats on Craigslist over $1200 and under $2500 that looked like they were worth a second look. Mostly seemed like people with these rotting boats just throwing it out there and seeing if anyone will bite. Obviously, I don't go and look at all these boats first hand, but the pictures and descriptions are usually uninspiring.
The other thing that's helpful to know is what repairs/replacement parts cost. For instance, if a boat is missing its rudder/castings/tiller assembly, that's going to cost you ~$1000 (at least, new) to replace. Sure, you could get a parts boat, or shop around for the parts, but do you want a project? or do you want to sail? Other big ticket items are the mast (~$1700 new, wide variations on used ones, but they're awkward and not readily shippable, so you gotta find one local), the sails (~$500 a set for anything decent used, ~$1400+ new), the trampoline (~$3-500 new, don't buy used), and the mainsheet blocks (~$350 new). Any one of those things missing or unusable, and a boat becomes much less of a "deal".
Hope that helps, and best of luck. I hope you find a well-maintained boat that'll give you the kind of economical enjoyment I've gotten out of mine!