Since you can plug the monitor into the onboard video. The onboard graphics will be use when you're not doing anything too demanding, and then the 260 will take over when you play games. I think that for the budget though if you want to go with that AMD based board you should get a 1GB Radeon 4850.
anything for less than 40$ after rebate is a good deal
This is just over 500 without shiping and no rebates necessary. Don't forget that you also get a $47 game for free as well as $20 3dmark vantage as well. If you're looking to cut some more corners, you could get away with a cheaper motherboard with an intel based chipset however you would need ati graphics to use crossfire. This was built based on your friends preference. along with limited upgrade capability (quadcore and sli)
Whoops, forgot a cooler in there for overclocking. Well my recommendation if money is tight is to stick with the stock cooler for now. You can get pretty far on that chip without increasing the voltage. As long as you don't up the voltage, the stock cooler should be fine for now. The case he has has good airflow anyways.