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Ok...listen carefully...here is what he should do.

Get the arcade - $199
Buy a used hard drive 20gig - $40 tops
Buy this to get xbox live membership for 13 months and headset and a keyboard pad(doesnt come with the arcade model)

http://www.amazon.com/Xbox360-12month-Messenger-GoldPak-Xbox-360/dp/B001EKTF60/ref=sr_1_8?ie=UTF8&s=videogames&qid=1223438158&sr=1-8

Sell his memory card and pgr4 if he doesnt like it - ~ gets 30-40 bucks back

All he needs is an hdmi cable or composite cables if he has an hd tv...

That all should be less than 300 bucks