Sorry to hear of your troubles . But A/C systems do tend to deteriorate with age, and repairs can be very expensive. If a compressor needs replacing its also quite likely other pipework, such as condenser radiator will also be nearing the end of its useful life,and may leak soon, or as a result of necessary dismantling.
The garage could perhaps have broken the bad news more diplomatically and at an earlier stage . But in their defence I would say they were right to point out the potential costs, of £500 as a minimum, and quite likely to escalate as more problems are revealed . These could easily exceed the value of a 20 year old car.
A less reputable garage might be happy to commence the work, and hit you with increasingly higher bills as more problems are revealed.
A few owners might chose to pay £1500 in repairs to keep their 'old faithful' on the road even though it doesnt make financial sense. On the bright side the car will still be usable without A/C ,perhaps for a few more years, and you have the option of putting what you might have spent on repairs towards your next car.
Check out these 'reusable dehumidifiers' in Halfords. One or two of these may help with your misting problem.
https://www.halfords.com/motoring/car-accessories/interior-car-accessories/simply-reuseable-car-dehumidifier-350g-720790.html?Whilst you are on the halfords site you could check out their DIY aircon leak products. Your car will have R-134a aircon. You would need to buy a trigger/gauge kit, regas cylinder and superseal. Total cost maybe £120 or so . However there is no guarantee leak kits will work , especially if ,as claimed, your compressor is knackered . And it wouldnt work if they have disconnected pipes etc during their diagnosis. If it doesnt work you will have wasted your money. Aircon specialists do not recommend using these products, and its not just because they lose the business. I dont know enough to recommend it, just drawing it to your attention. It would be at your own risk. Personally I might give it a try on a 2010 car or newer, if it has symptoms of a slight A/C leak but with a 2005 car I would just accept its game over for A/C .