Hi, RAN!
If your friend will part with the V, you are going to be way ahead, except in friendship!
The V has electronics that make it much more versatile. You will not have to carry a light meter around since it is contained right in the camera. The only drawback to the V is that if you have a flood, it will cost an arm and a fin to repair your camera; in fact, it could cost nearly as much as a new V. The proud owner of the III could get away with a quick bath in fresh water and fairly cheap "overhaul" by a camera tech.
Let me warn you, though: you still need a strobe, tray and arms and a lens. That 35mm is almost useless unless you get a macro kit of some sort. Consided a 28mm or a 20mm--Nikon makes the very finest, but Sea & Sea makes excellent lenses, too, for the Nikonos. That "free" camera will not be so "free", eh?
Whatever the outcome, both of you should invest in Jim Church's latest book on Nikonos Systems. The owner of the III should consider finding a used copy of Jim and Cathy Church's earlier text which includes use of the III.
Hope this helps,
Scorpionfish