This car actually belonged to my parents. I had a chance to drive it when I was a teen/young adult and still living at home.
Overall, mechanically I would give this car outstanding marks. It was still running on the original motor when we traded it in. The Subaru flat-4 motor seems very reliable.
The car's weakest part was its ability to rust. Granted, it was in Ottawa, Canada where they generously salt the roads in the winter. By the end of its life (11 years) there was severe rust holes at the bottom of the doors, rocker panels, rear hatch, front hood, floors and rear quarters. In fact, it was hard to say what wasn't rusty! Even when my parents bought the car (6 years old), it was already starting to rust in the rocker panel area. There was also surface rust on the rear hatch. The used car dealer fixed that, but they did a poor job, because the rust reappeared shortly thereafter.
The manual transmission often popped out of gear in reverse. It probably was a manufacturing defect, and as long as you held the shifter when in reverse, you had no problem reversing. We actually never got that fixed. Because you only reverse for short periods, it was a problem you could live with.
This car was by no means peppy; quite clunky in fact. It did, however, have a cool sounding "growly" exhaust. The car did seem pretty simple and I bet it would've been pretty easy to soup-up and get a lot more power out of it. In fact, the modern rice-rocket Subarus (ie WRX, STi) have the same flat-four engine layout, albeit a bigger engine displacement and pimped out computer chips!
Fuel economy was decent: around 10 L /100 km city, 8 L / 100 km highway. A little worse in the winter.
If you're thinking of getting an older Subaru, I recommend looking for one that spent its life in a dry climate. Even then, I'd recommend rust proofing it regularly. Try Krown (www.krown.com). It's one of the best products out there (no, I don't work for Krown; it's just that good). My parents and I have used Krown on subsequent cars, and the results are quite astonishing!