I think it probably is a threading issue and most of the repairs on FW are pretty easy to make, but I would use the fact that it won't sew properly right now to get a bigger reduction if you can. I bought mine that way and got them to come down an additional $50, I think because mine wouldn't sew either. After all, you can use the cost of a check up that you were given as additional ammo in the bargaining. I think the price is just about in the middle, you could take a look on Ebay and check some competed sale prices. Also, how many feet come with it, any extras like a buttonholer or monogrammer? Most of them came with about 6 or 7 additional feet, if that one only has one, you might also use that as a bargaining point.
I think this is a terrific book [h=1]Featherweight 221 - The Perfect Portable: And Its Stitches Across History, Expanded Third Edition [Paperback][/h]
Nancy Johnson-Srebro (Author)
and will most likely tell you all you need to know and there are several websites
http://www.singer-featherweight.com/index.html,
http://www.april1930s.com/index.html
http://www.ismacs.net/condition.html
Please let us know what happens and how you do.