I might ask the client, if he’s sensitive to costs, if there is any pre-prod work he wants to do on his own time/dime, before handing it off to you. If you can have him pre-filter that 1Tb of footage down to just his essentials, even if it’s just circling the best takes in his spreadsheet, maybe that would save him some money. For SURE it would teach him that what you do must take time and time is money.
I was going to also add that you make the long master first and then a cut-down using that as the source is faster and relatively trivial.
As far as your gear, I have no idea. You could, however, afford a new imac, external drive, and copy of FCPX or Premiere or Resolve, for what you should be billing this guy. Get the advance deposit before you whip out the credit card and call Cupertino 🙂
Added edit: Upon further thought, maybe you can offer him a deal where you don’t bill ANY time for this, but he bankrolls your equipment upgrade. There’s been times when I’ve seen that kind of deal work well for people.