Is it plagiarism to use another person's unpublished thesis?
You can work on anything you want. If you publish you must:


cite the thesis;
give an accurate account of what work was already contained in the thesis, and what you added;
if you use passages of text or images taken directly from the thesis, identify them as such (as a quotation or similar). Extensive use of such quotations or images may also require permission from the original author and/or their university, depending on who holds the copyright.