"Are loud and accurate mutually exclusive? Accuracy is definitely more important"
As funny as it sounds, thats really a subjective matter. Even the best audio systems are so far from accurately reproducing the live event, it seems like we will waiting a very long time before that happens. If you are using the RX-496, one of the main concerns you will have is using a speaker that the amp can easily drive. Even though its rated at 75 watts per channel, there's really no set standard for measuring power. You'll need to get something pretty efficient.
There's plenty of really decent choices out there in the $500 and under category. I'll give you 2 pairs that I think are worth looking at. This first one may surprise some people. I heard a pair of Pioneer SP-BS22. You can get them at Best Buy for around $150. They sound amazing for the money. If you take the time to set them up properly, they can really deliver entry level audiophile sound. They are easily one of the best deals I have ever seen in audio. If you don't like them, you can always take them back.
Another speaker I really like is Monitor Audio. Both the Bronze BX-1 and BX-2's can be had for under $500. I've owned Monitor in the past and they compete with just about anything in their price range. Audio Advisor sells them so you can get them easily if you don't have a local dealer.
I'm sure that some of the other posters will give you some good recommendations also.
Zd542 has mentioned some good choices. A couple of other options in your price range are Von Schweikert VR-1 and Green Mountain Audio Europa. It will be a challenge filling your 400sf room with sound. All of these speakers can sound good, but the more efficient speaker may be the better choice considering the room size.
I would reccomend that your friend scour sites such as this, Ebay, US Audio Mart, etc. for used speakers. Many great deals can be found. Speakers such PSB 400's, NHT 1.5's, Infinity RS 4000's, Paradigm Mini Monitors, and Platinum Audio PT 808's (excellent speakers all) can be had for $300.00 or less. I recently purchased a pair of PSB New Stratus Minis for $300.00 on Ebay. Good luck to your friend...and remember, it's not what other people say about audio equipment, it's what your ears are telling you.