I seriously considered this advice and looked into the NAV 122. I
talked to a friend of mine and the local avionics shop and they both
told me that Narco has a bad rep for service and gouges you badly to fix
a 122 - and they do break.

As others have pointed out, you don't need a heck of a lot more to make
the plane legal for IFR training/flight. Here's what __I'd__ do if I
were you. I'd sell the 300XL (since you got it for a steal, you should
at least get your money back) and buy a used NARCO NAV-122A on Ebay.
You can get a yellow tagged one for about $1300. This is the ONLY piece
of equipment you will need to be able to fly IFR legally - it's a VOR,
LOC, GS, MKR and CDI all in one 3 1/8" hole. You can then legally do
ILS, LOC, and VOR approaches.

I did exactly this in order to make my COZY MKIV IFR capable (for
training purposes and light IFR). Even if you have to pay someone $500
to install it, it's still the cheapest way there, using the least panel
space.