Hi Mike, I am relatively new to Subaru and older Impreza models, too. I just became a Subaru owner a few months back and had all those same questions. Here's what I learned from my Suby owning friends:
Start here: Used Subaru Buyers Guide
Inspect the ball joints. While a torn boot does not mean the joint is near failure, it does mean you should plan on replacing it soon. If the wheel is off the ground and you grab the tire at 12 and 6 o'clock and try to shake it and you can feel it wobble, then there is a chance the ball joint is bad and you should NOT drive it.
Also inspect the CV joints, and the rack and pinion steering and look for exploded boots and greasy gunk everywhere. The rubber ages, boots tear, and then the internals start to wear out when dirt and water get in and the lubrication is gone.
Check for signs of blown head gaskets, a common problem on older Subarus. You can probably google what to look for, here's a generic list from Napa.com:
-An external oil or coolant leak at the seam between the engine block and cylinder head is a sign that you have a head gasket failure or a cracked block. On disassembly, check for cracks and cylinder head warping.
-Cylinder misfire is another sign of head gasket failure, especially if the breach is between two cylinders on the same head. Cylinder compression and leakdown tests can localize the leak for scrutiny on disassembly.
-Misfire on startup, if accompanied by a puff of white exhaust, could indicate a leak from the cooling system into the cylinder.
-Overheating is one of the less-obvious signs of a blown head gasket. Depending on the severity of the leak, you may see bubbles in the overflow tank, indicating that the cylinder is leaking into the cooling system.
-Blue exhaust smoke could also indicate head gasket failure, but so could worn rings, valve stem seals or a faulty PCV system.
-Discolored fluids are more subtle signs of a blown head gasket.
-Coolant-contaminated oil takes on a frothy consistency; itís like finding a latte under your oil cap or in the valve covers.
-Oil-contaminated coolant forms a mayonnaise-like film, which you might find on the radiator cap or in the overflow reservoir.
Try to find out if the timing belt was replaced. If the owner doesn't have records, but takes it to a shop for maintenance, there is a chance that the repair job would be listed on the vehicle's CarFax service history report, so you could check get one of those too before buying a car that you do not know anything about.
Look for rust. This car is 17 years old, so rust damage to the body could be a real concern. if you see bubble paint, spots, or even holes, expect that what's hiding under the paint could be worse. You can check trouble spots and suspicious areas by getting a strong magnet, covering it with a thin cloth, and testing how well it "sticks" to places that SHOULD be metal. if it doesn't have a strong bond, chances are there is a lot of body filler (Bondo) underneath instead of clean metal.
Make sure to check all the fluids, too, before driving away. This is by no means everything you should check or have inspected before buying, but it's a good place to start. Good luck!