Refer a friend and deactivated account

Q u o t e:
I was wondering if the refer-a-friend works with deactivated accounts. Can I refer someone with an old WoW account, have them re-activate it, pay for 2 months and I still get the mount? Do they have to get a brand new account for it to work?

Recruit a Friend is used to create a brand new account, it can not be used for existing accounts. As Molotos said, you'd want to use the Scroll of Resurrection if the account has been inactive for 90+ days and has not redeemed a Scroll of Resurrection already. The benefits of the Scroll are substantially different.

Q u o t e:
Ah that makes sense.

Then my next question would be, do I need to upgrade all the way to the expansion or can I just shell out for vanilla wow?

Vanilla World of Warcraft is all you need. :)