james,
well, it is a challenge. i'd be curious in knowing what caused this damage like this. it sort of looks like flood damage, where there is mud caked on the image and then it dried and cracked, but it would be interesting to know for sure.
also, if this is mud caked onto the image, you might tell the person to have a conservator clean it first...very carefully. after that, a scanning and restoration would be much easier.
the good news is, it can be cleaned up. the bad news is, it's not going to be cheap. the extent of damage is quite, well, extensive. there is a LOT of work here. this isnt something that can be run through a few automatic processes and 5 minutes later, bingo, new photo. there is a LOT of cloning to be done here and cloning is slow and meticulous work.
i did some work on this just to get an idea of what was necessary. i ran contrast/brightness first to bring out some more detail. i then ran both Paint Shop Pro's digital noise removal and polaroid's dust and scratch remover to get rid of some of the easier spots. i ran both of these at light settings. i didnt want to blur things too much when i need that detail for cloning. after that, it was all clone at a low to medium opacity and a very small brush. i started with the little girl, as she is the main focus of the picture. most everything i did was done below his belt line, as this is where the most damage is. i would simply continue moving down from there if i were going to finish this. what i did took about an hour to do. there are several hours of work left to do this up right.
you might also ask him if he'd be willing to have all that space to the right of the gentleman cropped out. this would make the job a bit easier (and thus cheaper if he's willing to pay). it's pretty much worthless space to the image.
i'd be happy to do the rest of the job if he's interested in paying for the service and you can contact me via the private messages here on retouch as a start. if he's not, then perhaps some other volunteers will finish what i've started or try their own. i warn you, though, i'm not cheap

oh, and i also pay for referrals
craig