Does he already have a DVD player? If so then I could recommend my system - the Sony HT-DDW840 ($350 when on sale at best buy). If he doesn't have a DVD player than there is an Onkyo system many people like but I think it may run a little over $500.
James that basically means that it's kinda weak. For example one of the systems I have is the Onkyo HTS650 which puts out 650W.
To answer the original question if you already have a DVD player then I agree with Mark and would go with the Sony HTDDW840. If he doesn't already have the DVD then still go with the Sony and also get the Sony DVPNS715P pregressive scan DVD player
I'm going to recommend the Kenwood HTB-505 (Similar to my own but newer) reciever & speaker package. MSRP $499 I just checked Sears where its $349 (use the money you save to buy a better subwoofer, like a sony sw-ma40).
I just bought the Kenwood HTB-505 and I absolutely love it. I found the sub to be plenty strong, but my setup is in a smaller room. Even my wife, who was against it from the start, loves it and tells me all the time that she is glad that I talked her into it.
I would highly recommend the Onkyo HTS-650, but as others have mentioned, it does not include a DVD player. But the sound is outstanding, and I got mine recently and it does not have the LFE problem (reported elsewhere in this forum - Onkyo is fixing the problem in those rec. that have it).
Circuit City and Fry both carry the system but you will probably get a better price via an online store like SoundCity.com or BestPriceAudioVideo. Be careful though that you buy through an authorized dealer (which you can verify through Onkyo's web site). Both the ones I listed are, to the best of my knowledge, authorized dealers.
I have to agree with the HT-S650. I had it for 4 months and my neighbors and I thought it was amazing for the price. I never realized I had an LFE problem, it sounded that good. Once I learned of the problem, I tested it, found I had the problem, took it to a service center and 24 hours later had it back. Sounded even better, which I thought was not possible at this price level. You really need to audition these systems for yourself. I listened to most of the HTIBs out there, including Kenwood and Sony and almost gave up on the notion of a decent sounding HTIB - they were all weak in the bass, tinny at the high range or muffled, etc. etc. The Onkyo sounded head and shoulders above the rest at $800 and below. Your mileage may vary.