160,000 is very very low miles for a 20 year old truck. Unless the guy was a full-time RVer living in his 5th then Id say he drove very little ever.
It probably has original everything mostly. You will need to figure that you will be replacing things at some point. If it is original injector pump then it might die tomorrow. 160 is a long time for that pump. The clutch likely has been replaced, if not then it is pretty worn likely, or maybe it an auto..
Anyway, if it is only $7,000, and only has 160,000 and there is no big issues, then it is a good price. Even if you drive straight to the shop and put in a new clutch and trans /or auto trans it is still a good price. I think you confirmed it is 4x4, if 2wd then $7k is still decent since low miles but nothing special.
A dually is not necessarily needed for a TC.
Yes, these 2500 trucks are ample for most truck campers. Though, TCs come in many weights. 1,800-2,500 is the normal light to medium weight. Anything heavier and you will want a dually.
With this 2nd gen truck you can simply add air bags. On this truck there are leaf springs which are outside of the frame rails and the air bags will go directly on top of the springs (might need to remove the helper springs), so you do not introduce any imbalances as if the bags were to go inside the frame rails.
The goal with bags is not to get the truck up to empty height, but to get is mostly level. The truck sits rear high when empty because the engineers figure when you load it with normal stuff there will be some sag, so they allowed for this. Air bags up to give some support bc a TC is a little more than the average load.
The weight weak link is usually the tires and wheels. You will need, and it has Im sure, E rated tires, 10 ply. which can handle over 3,000 lbs each.
Mine weighs 1,800 dry, and yes, add 1,000 lbs if you have a lot of stuff, which includes propane, water and all your food, gear, bedding, pots pans etc. and what is in the truck cab, people, dogs, tools etc.
Depending on your plans for camper is what you want in it. No shower for me is a no deal. I used to have a pop up TC and though it was great driving for mpg cross the country and back in reality it did not save me enough to put up with all the negatives of a tent top. Tents are noisy and cold. I am way happier with a full size, and it might cost 100 bucks more to drive across the whole country. well worth it.
If you insist on a pop up then do not get the HECO lift system. All I will say is; nightmare.
In Canada, how do they enforce weight? Do they look at the truck door sticker and then look for a camper sticker? Campers are always listed dry weight, and may not even include features like AC in the weight. If they go by stickers then you should be fine, if they weigh it then everyone is over, haha. Do you have to go through highway scales?