I think you can stick to onboard graphics for "watching movies and surfing". If he plays RTS though, you could just get the XFX GT N 640 Double D card. Review: http://www.youtube.com/watch?v=EIJLJ1Yy9IY&feature=plcp
Then again, your on a budget, so ... yeah, you might not be able to afford that and probably don't need it.
You don't really need 1600 MHz memory either, that only makes a diff. with video editing or photoshop or something along those lines. Just get 1333MHz.
If your going to store the movies and other stuff, I'd suggest 500GB.
Seems like a pretty decent build though, but you could get mATX, to save you even more money. The thing is, most decent mATX cases I've seen don't come below 80 dollars.