You can't really go bellow $550 for a gaming rig. However since your friend only has $800 this is what I suggest for that price.
Go with Intel 7200 2.53 GHz C2D is more then enough plus you don't have to buy cooling or an overclocking motherboard cause it won't bottleneck your vid card.
Core 2 Duo e7200 2.53 GHz
$129.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16819115052
If you must overclock then You can't beat the Gigabyte GA-P35-DS3L in a $550 rig
GA-P35-DS3L
$109.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16813128059
9600 GT $60 cheaper then what was suggested still will run everything out.
MSI 9600 GT 512 MB GDDR3
$139.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16814127362
For a $550 rig your not going to have much room to overclock (especially without a good cooler) Hope your looking at Windows XP cause 2 GB is about all you can afford.
Wintech APX 2x1GB PC26400 (800 MHz)
$39.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16820161229
Don't have much cash left over and a 380watt is more then enough for your rig so this combo case & powersupply should work well.
Antec NSK4480B
$89.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16811129032&Tpk=Antec%2bNSK4480B
For gaming alone 160 GB is more then enough space. I actually use a 160 GB for my gaming rig partitioned into 2 80 GB partitions. You will run outta space real quick if you put a bunch of DVD length movies on there but otherwise 160 is good. On top of that if you are using up a bunch of space then u need to get a bigger secondary drive anyways, it will make your primary last longer.
Western Digital SE WD1600AAJS Caviar
$43.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16822136075
Already over budget so really all you need now is an optical drive. I don't have a problem with light on, and Sata drives are the way to go
Lite-ON DVD+-RW
23.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16827106263
Total So far $583.93
Add Trendnet Wireless card (Inexpensive but decent brand)
17.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16833156141
The speakers mentioned above are fine
22.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16836121014
The above Monitor is fine as well
Acer X193W+BD Black 19” 159.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16824009127
Keyboard & Mouse
Microsoft Keyboard $ mouse 25.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16823109139
Now adding those items took the price to
810.89 before shipping.
The Above rig has a better video card and has better memory, my suggestions have the better processor (For gaming), is the total system and is closer to your price. GL