If you want t o play games smoothly you should probably ditch that whole setup, that motherboard only supports 2 gb of ram which won't really cu it right now, also that video card won't play any modern game very well beyond low settings.
As another guy said, if you want to game, you'd have to invest in a board that supports >2GB memory. If it's just for productivity, a Core 2 Duo setup with a $30 video card for HD video acceleration and Flash acceleration is fine. CPU + budget card + DDR2 RAM + PSU will cost about $150, then add the monitor, $100 more. If you want a modern gaming system you'll need a completely new setup.
Agree, build a new system in the old case using new MB, new CPU, new Memory, new video. Keeping old optical drive, disk drive.
+1 SOSOFM for <$200 AMD build. He may still need the power supply and the video. Depending on the vintage of his other parts, he may really need a new hard drive also. (Glad to see the MB you choose supported IDE (Pata) odds are his current disk is an IDE drive.
For the i5 build (which is the right answer) you selected 8GB memory. He probably doesn't have a 64-bit OS. If he's a student he can get a cheap copy of win7 64-bit from microsoft.