for gaming, AMD K8's are the way to go. since you're on a tight budget, I'd say go for a Sempron 3000+ socket 754 for $88, or 3100+ for $104
the socket 939 Venices start at $146. they overclock well, if he wants to learn how to overclock, but if it's not in your price range, then Sempron by far, with a Gigabyte K8NS (cheap but descent motherboard)
and one of the following cards:
PNY Geforce FX-5200
eVGA Geforce FX-5500
Amigo or HIS Radeon 9550
the PNY FX-5700
for $59, which is a good price for that card.
the Sapphire Radeon 9600 Pro
the 9600 pro is about the highest you should go if you're on a low budget. the 9600's were extremely popular for being a great card for the money, however the Nvidia 6600's are taking their place. still, the 9600 Pro should be able to run a lot of games even now.
either one you get, try and get one with a fan on it. if you only have passive cooling, it does a lot less than if you even have a small fan on top of the heatsink.
for RAM, 512MB PQI Turbo, which has a $15 rebate. it's not expensive, but it's good RAM. should be able to overclock descently aswell, if he wants to try overclocking.
for your power supply, the Thermaltake 420W silent purepower for $33.
the power supply needs to be good quality, because if it is not, it can kill the system, or at least cause crashes (I know from experience). thermaltake make good PSU's. with the parts I recommended, it won't need anything above 420W, so this is a good value PSU that's also good quality.
other than that, choose any case, or let him choose one, replace the PSU it comes with if there is one (the ones that come with cases are usually not very good)
and make sure the PSU is set to the right input voltage (115 or 230, depending on where you live)
if it is set to 115 and you live in an area that has 230, the PSU won't last. if it is set to 230 and you live in a 115 area, it won't give enough power.
hard drive: probabbly 80/120GB. go for a Seagate or a Western Digital.
monitor: it's up to you. you can get second hand CRT's pretty cheap, even the big ones (I got a 21" second hand for $380 aus, and it is one of the best CRT's around) but just make sure you actually see it running before you buy second hand. then you know it works.