Based on my personal expirence it is always better for a newbie to get into the world of modified motorcycles on a japanese machine rather than british, italian, or american. The jap bikes are far less problematic than a brit bike and not as tempremental as an italian. The onyl thing that suffers is the ride quality which can feel very neutral and neutered at times verses that go for it shake, rattle, and vibrate of vintage euro machines.
AS for the bike:
My personal expirence with yamaha xs twins of any shape is that they are no road burners. Like any jap machine it will have a few engineering weaknesses but will otherwise be stable, usually they will have problems in the timing chain if it is anything like the bigger xs. it's a late 70's 400cc parallel twin so don't expect to be ripping up the road but it will make a very pretty cafe bike when done. $600 is a pretty good price for any jap bike that runs and drives.
That bike looks very clean which is a good sign. However the rubber deterioration is a sign that the bike has been in storage for a long time, and may have been outside at one point. The carb intake rubber being replaced is important because any holes in them can cause a lean condition, and the carbs to behave funny, eventually leading to a burned up piston if left unchecked. The tires are another big thing because it can cost you a few bills and you can't ride on cracked tires. Figure you are looking at around another $150 in rubber to get it roadworthy.
Now the big question: what do you want to do with this bike? If you just want to fit bars and rearsets, ditch the rear fender, and do a fer custom tweaks to the bike and ride the snot out of it racing around the city then this is a good choice. Stock spares (new and used) should still be available on ebay and pretty cheap.
If you want to build a full on aluminum tank manx style replica this is not so good a choice as 1) the bike's value is too low to justify the expense of handcrafted aluminum tank, tail, and race pieces; and 2) there is no real aftermarket for this bike like a norton or triumph. This is the road where the bike gets torn down to the frame, and everything gets a working over.
For a first cafe bike I say go for it. Personally I prefer that most newbie's start on hondas but that is because 1) I sell mostly honda parts; 2) I am mark biased as I own a lot of honda bikes; and 3) hondas have more enthuasits. Vintage honda's have now grown in price to the point where they are not the cheapest 70's jap cool on the block. Anyway, ride the bike, feel it out and see if it has anything you don't like about it in it's ride quality. At some point sit on the bike, put your feet on the passenger pegs, and grab the fork ears, this will give you a sense of the cafe rider's pose, if it is not comfortable on this bike then move on.