[SCadaddle]

As the current owner of a 97 Outback, a 98 Outback, an 05 Legacy Wagon and former owner of yet another 98 Outback and a 92 Legacy Wagon....congratulations. That one is a peach. Simply because it is a 96 with a standard transmission. That means you got the bullet-proof 2.2 engine (as confirmed in your photos). Now had you bought the same car, same year model with an automatic transmission you would have found it to have the 4 cam 2.5 engine----the one with almost guaranteed head gasket issues. The 2.2 is very uncommon to having the same issue. And the 96 Outback with the 2.5 came with the note "Premium Fuel Recommended".

I'm in Mississippi. Land of No Subarus. We have one dealer in the entire State. And they typically get 30% over retail for OEM factory parts from their customers. As for myself, I purchase any parts I may need from either the Pacific Northwest (Chaplains Subaru in Washington State), the Northeast (subarupartsforyou.com which is Dan Perkins Subaru in CT) or Huebergers in Colorado. Some of these outfits offer free shipping if you buy more than $100 or $200 worth and they are DEEP discounted from retail price. I'll typically use the factory online part number search from Bryan Subaru of New Orleans to find out exactly what part number I need should any of the other online dealer websites not give me that detail. Google "Six Star Bernie" for another parts vendor, although I've never purchased from them.
If you paid $600 for the car, get ready to spend at least another $700 just in (deep discount) OEM parts just to do the timing belt, idlers, tensioner and water pump. Or you could go less money with a Gates or Dayco kit. But beware the components built in China, namely the timing belt idlers. 11 years ago, when I replaced the head gaskets, timing belt components and clutch components in my 97 2.5 Outback, I spent nearly $1200 in parts alone.

If it is leaking oil from a source not so easy to fix as the valve cover gaskets, I would recommend a new OEM PCV valve and changing the oil to Valvoline Max Life 20W50 synthetic blend that contains the seal conditioner. That alone did wonders for my 98 that would leak, drip oil on the exhaust and smoke after driving on the interstate at 70 mph for beyond several miles when the ambient temperature was more than about 90F.

Your clutch and shifting issues could be as simple as the clutch slave cylinder (note--if the pedal randomly flops to the floor, don't freak out, just reach down and pick it back up and you will be good to go for the next 6 months to 5 years that it happens again!) or the shifter linkage coupler ($50 part) and for sure the plastic bushings at the base of the shifter are toast by now if the shifter is all "floppy". If the leatherette boot around the base of the shifter has a tear in it, whatever you do, don't let a coin such as a penny get near it. Been there, done that, couldn't find but 2 out of 5 gears and one hell of a bent penny afterwards!

The early series of Legacy Outbacks were in my opinion the most durable of the bunch. Enjoy it!