Long time machinist/Gunsmith here. The advice about staying away from the multi purpose machines is spot on, they lack rigidity and repeatability- both essential to quality machine work.
Invest in a quality gear head lathe, it is the only machine in a shop capable of replicating itself and it is the most versatile machine a machinist/'smith can own. 13-40 is a common size and well suited for 'Smithing work.
Look for a narrow headstock machine with a spindle bore size as large as possible, 2" will accommodate just about anything a "smith will encounter.
Yes it will be heavy but that is a good thing, lightweight lathes lack rigidity and are prone to vibration which can wreak havoc.
Try to stay away from Chinese machines if you can for obvious reasons, I have seen too many posts and references to quality issues, repeatability and accuracy issues.
My personal machine is an ATRUMP 1340 of '95 vintage that I found on CL for $2500.00. It tips the scales at 1700# and is Taiwanese with Meehanite Iron and flame hardened ways. It is a very solid, accurate and repeatable machine.
My machine at work is a Clausing Colchester 8000 series, again of Meehanite iron and flame hardened ways. Solid machine as well, the only scary thing is parts can be tough to find.
We also have a Grizzly G9036 and it cannot remotely come close to either of the machines I mentioned. It's not a good sign when you go to change the oil in the headstock and you get about a tablespoon of sand from the casting process out
DRO is not a necessity and I actually wont use one for 'smithing work, I am focused on my cut and don't want to look away from the work. Dial indicators on mag bases will work just fine.
Another consideration is power. Don't even consider a 110/120V lathe, insist on 220/240V machine and preferably a 3 phase machine. They are more efficient electrically and just cut smoother.
The cost of the machine is just the beginning, he will have as much if not more invested in tooling as the cost of the machine.