Man, if all he wants is to play some games, this is very doable.
Video ATI Radeon 4670 - 80 bucks, free shipping.
http://www.newegg.com/Product/Product.aspx?Item=N82E16814102792
Motherboard FoxConn AM2+ AMD 780V 55 bucks plus shipping, if I'm not mistaken, this may allow him to upgrade into a quad later.
http://www.newegg.com/Product/Product.aspx?Item=N82E16813186143
AMD Athlon x2 5400+ 63 bucks
http://www.newegg.com/Product/Product.aspx?Item=N82E16819103235
2 gb of Kingston ddr2 800 ram 19.99 plus shipping
http://www.newegg.com/Product/Product.aspx?Item=N82E16820134488
So far we are at 220 bucks.
LITE-ON dvd burner 20 bucks and free shipping.
WD 320 gb hard drive 50 bucks and free shipping.
http://www.newegg.com/Product/Product.aspx?Item=N82E16822136098
So 290 bucks.
HEC Case for 60 bucks, comes with a 585 watt power supply. According to the pictures, the PSU appears to have 2 12v+ rails, 1st at 19 amps, 2nd at 20 amps. Though I've never used one of those however.
http://www.newegg.com/Product/Product.aspx?Item=N82E16811121002
So total comes in at 350. Plus say 15-20 bucks for shipping, but decent gamer rig under 400. You could spend a little more and get the 4830, but I think the 4670 will give him room to grow as well.
Another case option is this Broadway case for 50.
http://www.newegg.com/Product/Product.aspx?Item=N82E16811162042
Now bad part on this one, is that the PSU is not as powerful. I actually have this very case. Recently upgraded the PSU and fit a 9600 gt in as well. The PSU that came in it, I ran for a year. It's rated for 24 amps I think, if it's the same one they gave me with mine, so should run a 4670. But it's just sitting because I would be afraid to hook it to my 9600 gt which needs an external power connector. However with a 4670, you don't need that. Decent case and big 250 mm fan.
I started you off on 2 gb, but maybe grab 4 instead. Your choice. My rig runs fine on 2 till I get a 64 bit version of vista. Currently running the 32 bit version, so what's the point if my computer can't use it?
Also, instead of XP go with Vista.
http://www.newegg.com/Product/Product.aspx?Item=N82E16832116488
If you grab that 64 bit Vista home premium, you should be set. System under 500 that will do a little gaming if you are not going full resolution with all the eye candy. I know my 9600gt is supposed to be on about the same level as the 4670, and if the 4670 does that good, I would highly recommend it. But hey, the price vs performance is hard to beat.