So it sounds like it's a 2003 model. Is it pretty much stock? If so, the retail prices on those bikes was around $500. I looked up the component specs and they seem to match up with the rest of the $500 price range crop of hardtails. If he threw in clipless pedals for you in the deal, depending on what model they are and in what condition they're in, that can be on average an added $50 bonus. So yes, I'd say you got a pretty good deal on the bike assuming it hasn't seen any abuse or crashes and especially if you know the buyer personally and can verify the type of riding the bike's already been through and/or how well it's been maintained.

Assuming it still has the stock fork and most likely it does, it's a RockShox Judy TT with 80mm of travel. This fork uses coils and elastomers to provide suspension action. The preload adjustment will preload the coil so that the shock is not too springy or too hard. This is done by measuring and setting the sag when the rider is sitting still on the bike. You should be able to find the owner's manual on RockShox's website. According to the manual (page 4), you should set the sag for between 13mm and 20mm. If you feel that the fork is too unresponsive (stiff) when hitting bumps and such, set the sag closer to 20mm but if you think it's too responsive (loose) then back off the preload so you're closer to 13mm of sag.