Pair up some PSB Image or Alpha speakers with NAD 320BEE. They're a great budget combination. Used will certainly be in this price range, if you look hard enough you might find a combination new.
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Forget integrateds in this price range. Go with an Onkyo TX-8211 receiver for $200. Not high-end, but solid sound. As for speakers, the PSB Alphas ($250), or Paradigm Titans ($230), or B&W DM303s ($300) are all worth a listen. Don't pick his speakers for him; let him listen for himself and choose (even if he chooses something you don't like!).
I agree that the NAD C 320 BEE is the one of the best budget integrated amps. I have owned one for 2 years now and I have been very satisfied with the purchase. However, if your friend has used a boombox for all these years, he probably wants FM capability. My guess is that he prefers to buy new, as opposed to buying used ... which is more of an audiophile practice.
I will be suggesting a few systems built around the Wharfedale Diamond 8.1 speakers. These speakers were well regarded and well reviewed a few years ago and have been replaced by the Diamond 9 series. The 8.1's have a very musical midrange and some bass (down to about 70hz).
Buy.com has the Wharfedale Diamond 8.1's at half-price for $130. They also have a 2 channel receiver, the Harman Kardon HK 3380 for $240 (total system cost new would be $370). For another $55, he could step up to the HK 3480 (total system cost would be $425).
Your friend may be interested in HT and may want a system that would work for both music and movies. J and R Music has the Onkyo SR601 for $300. This is a $500 receiver that has been replaced by the SR602. Using the Wharfedale Diamond 8.1's mentioned above, 2 channel HT would cost him $430. Adding the matching center channel would add a $100 (3 channel HT for $530). Another pair of 8.1's would give him 5 channel HT for $660. Going for the full monte and adding the matching sub-woofer (additional $125) would give him a very respectable 5.1 system for music and movies for $785. He would not have to buy anything else for the next 10 years.
Obviously, there are other ways to go. I have owned versions of the HK, Onkyo, and Wharfedale components and they are well made, decent performing units for the money.
Also consider the Tannoy Fusion 1's. Wonderful loudspeakers! Beautifully voiced and has surprising good bass response. Of all the small loudspeakers I've owned over the yrs., these are keepers. The Spendor are great loudspeakers, however they are very difficult to drive. Go for the Tannoy's and spend more on your amp. The Creek 4330 SE is a really good int. amp and used under $500 is worth considering as is Arcam, Classe, and others.