If it were gift from someone you respected and cared for, I would leave it as he passed it along... it would take away from the gift (remembrance) to "restore" it.
Besides I suspect a proper restore is beyond the value of the rifle, probably not possible at all, - I would think a Native American hunter would have used it religiously, probably under harsh conditions, so besides the D&T, sportered stock, the finish was probably re-done too, which as anyone who knows anything about German rifles, the finish is the most important thing after the stock (why rc's are junk-shooters), the missing rear sight is the cherry on top for not restoring it.
Just an opinion though, but if it were me, i would either use it as your friend once did, or keep as he left it, - a good way to to keep the memory alive. Either way, welcome to the forum.