Like any DIY project, you're rolling the dice. And that goes double for used stuff.
Some of my customers do it and get away with it, others end up buying it and then calling us to get it going (or worse, we tell them why they can't use it) and it ends up costing them double. Just be prepared for that, as I see it regularly.
Also, you're budget is on the low-end, maybe not too outlandish for refurb, but I can tell you that $700 is less than dealer cost on the cheapest equipment we can buy at dealer cost by several hundred dollars (and that's on the most affordable equipment, even more for all in ones).
Though I agree all in ones look neater, there is something to be said for 2-piece legacy equipment, especially if you're going to get into the DIY realm for the future. One defect in the all in one unit, even a mag card reader, means losing all components instead of one, either by way of junking it or sending it out for repair.
Just the other day, we had a client take a power hit on a Radiant machine that seems to have cooked the motherboard (likely the screen was fine). If this was a two piece unit, he'd just be looking at a new booksized PC. Now he is looking at replacing everything, since it's really not worth repairing.
No, you generally don't need to have the same version of windows on the terminals-and I have several environments that run both full versions of Windows and embedded statins as well, with some different settings, but they can work together fine.
My personal advice in this case. You've got to call the dealer for the license anyway this time around, I'd consider just paying them to put in a new unit and get the 3 year warranty.
I think RosemaryBaby is right on the money- if your generally curious as to how this stuff works, don't mind some trial and error, possibly a little downtown with this terminal (maybe with the network), and are fairly computer literate, than this may be something you want to pursue. It depends the restaurant too... I've seen some places with 4 stations not bother replacing stuff until they got to 2 working stations, they make due. I've seen places that have 11 stations go into a panic when the touch screen calibration is off on one screen.
On the other hand, if your only motivation for doing this is saving money, and you for the most part, just want the darn thing to work without hassle-I'd let the dealer do it.