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1. ? Can Elements 3 handle the conversion from negatives to positives?
I would assume that the negatives have faded over the years (although hopefully protected from light most of that time) and I also assume that Element 3 can handle that type of adjustment.
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Yes to both. First, changing a negative to a positive is as easy as inverting the image (Ctrl+I). Second, adjustment for fading, so long as it is linear (i.e., the negs have been stored in darkness, not partially in light), a levels adjustment (as outlined in hidden power
http://aps8.com/hppe3.html) will likely take care of most or all of the problem.
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2. ? Since there is a large number to convert - is there a way to "automate" that process in E3?
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I'd say yes and no. I might also suggest getting an outside service to scan--and/or to review and scan selectively. I have often used the Kodak Photo CD services, and it runs about $2/scan with a resolution that is far better than a home flatbed scanner with a transparency adapter. If your friend has a negative scanner, that is another story. If you are talking about automating the correction process, it can be automated, but I don't recommend it. Individual images have individual exposures, and if the images are worth saving, it will likely be worth the time to correct them on an individual basis. Running a script that does auto-correction may work for some images, and not others, and would lead to images being judged unfairly due to what may have been an error in scanning or in the cold automated procedure making a bad decision not based on the way the image looks. That said, I have batch actions that will auto-correct images that you can download for free from the hidden power website:
http://hiddenelements.com/downloads.html
Hope that helps.