Too good to break. BUT Not economically repairable?
You'll have to decide which it is!
I've seen similar S Types with less expensive MOT issues online for £300-£400. If it is genuinely pretty nice with an MOT it's only going to be worth around £1K, (plus the fact that it was written off will imply additional inspection costs).
Unless your Dad is hopelessly sentimentally attached to the car, the best way to maximise returns is going to be by breaking it yourself.
If your Dad did get rid of the car what would he buy next? If he's going to go out to buy a £2K S-Type but he definitely knows that the only thing wrong with the current car is only the sills need doing then he might be better off keeping it & getting the work done.
Ask on this site whether there's anyone in your area who'd be able to take the welding on for a more realistic price, (price up parts & paint first. Don't forget to price a replacement bumper unless he can live with the scuff).