If he accepts the insurance company offer he has "sold" the bike to them. If he then buys it back it's another transaction that will generate a salvage title. The only way to avoid a salvage title is to retain possession, ie, not accept money from the insurance company, repair it and ride/sell it.

To the OP, for $1200 it would be hard to see how you could go far wrong. Id think you could probably double or triple your money selling it as is. You probably get even more if you take the time and effort to part it out yourself. From what I've seen lately you could probably get close to 2k for the motor, 600+ for the trans, 500 for the bags, maybe 1k for the tour pac, 300 for the radio plus so much more. Body panels, fender, tires, wheels, tank, guages, controls, shocks, etc, etc.