Aaah, sorry. Didnt see the auto bit, that is a bit different. All of mine are manuals, so I cant really compare well there.
My 1600 with a manual definitely seems slower than the 1800 with a manual, but I dont know what an auto would do to the 1800.
85 is Gen2, there were no Gen3 Brats from the factory. (although one guy on here made his own) Gen 3 subarus are the 85+ wagons/sedans with the EA82 engines.
It may depend on your transmission preference. After driving a Brat with a manual, I dont know if I could go to auto, it just takes alot of the fun out of it. Although my wife might appreciate the auto, alot of the womenfolk we know seem to have trouble with manuals, for that matter.
So if you like or can stand autos, you might still try the 85. Also if you plan on doing alot of summer driving, of course. Brats cool down pretty well with all those windows open, but summer heat gets to everyone eventually...
Given the situation though, $700 could be a whole extra car, not to mention money to get parts, of which you will likely need many. So that plus the auto might swing me to the 78, if I were in your shoes.
One caveat: if you can, and haven't already, try to do a thorough inspection for rust to judge the relative condition of the bodies. They are going to have rust of some sort, but not all rust is created equal.