I'm afraid you are going to have a hard time upgrading that. That is an all-in-one PC, it uses laptop components rather than desktop to keep the low profile. It does actually have a slot for an MXM laptop GPU, but you will have a hard time finding one, they aren't available for retail, you'll have to go digging around ebay or something like that to find one.
As far as power goes, your PSU is an external brick connected to the power cord, similar to a laptop power cord. Odds are you won't be able to upgrade that, or if you can, you'll only be able to do it through HP. These sorts of power supplies tend to be proprietary, and will only work with specific computer models.
I would say it isn't worth even trying to upgrade that machine, even with the lower power requirements, most decent laptop GPUs are probably going to need more power than what the current power supply can deliver. At best, you'll get something a bit better than the integrated graphics, but still not really good enough for any serious gaming.
If he wants serious graphics horsepower, he really should consider getting a real desktop, and not one of those all-in-one systems.
Since its an all in one with an IGP i highly doubt its going to even have a slot where you could add in any sort of GPU, and you would have no way to get the connectors to the outside of the unit. The major downside of all in one units is there is basically zero upgrade potential in them. If he really needs more graphics power he is going to need a new system, i would suggest a tower and a separate monitor this time around.
It has an MXM slot, so you could add a mobile GPU to it. I don't know if a 180W PSU would be enough, though, and I don't know if it's even possible to buy a new one for a PC like that. It's basically a non-mobile laptop (like iMacs).
EDIT: In the mobo details it says:
Integrated video is not available if a graphics card is installed.
Integrated graphics using nVidia GeForce 9300M
PCIe x16 interface
GeForce 9600M-GS graphics card is supported by some models beginning in Fall 2008.
Integrated graphics using Intel GMA 3100
Enabled for selected Touchsmart models without discrete graphics card
So it might be limited to a 9600M-GS which is pretty bad... honestly, assuming your friend is hoping to play games, tell him to buy a new desktop.
There is going to be no worthwhile upgrade for that computer. The 9600m-GS is the best card it officially supports, and that is quite weak by today's standards, probably below the minimum system requirements for a lot of games. He needs a new system if he wants to even think about PC gaming.