Well, here's another suggestion. It likely won't run TF2/L4D on highest settings (the last one most certainly would), but it should be able to handle them without much of a problem. I only really messed with the Mobo/CPU/GPU, as everything else has a great performance/price ratio. Of note:
The motherboard is Micro ATX. I hate Micro ATX, simply because it's a bitch to plug things in. Too tiny for me to work with, and not much room for upgrading, but it should be fine for a budget gaming rig if he's not expecting to run Crysis, or planning to upgrade to a srs gaymer rig.
-The GPU I chose as per the suggestion of
Tom's Hardware. It is still a great card, it's just no 9800GT
-The CPU is newer than mine (mine's a 4200), should be fine. Luckily (or unluckily?) Source engine games are PCU-hogs, so I'd imagine this CPU would do you right. He may notice that TF2/L4D chug at times (if he's used to 60fps anyways), but
enabling mutlicore support (lol spelling ftl) would hopefully see a big boost in performance for him, should he NEED 60 fps.
The motherboard only has space for 2 SATA devices, one of which would be a hard drive and the CD/DVD Burner I suggested. If he want's the room to add additional drives later, I would suggest bumping the motherboard up a bit to this
-Couldn't stand recommending the other motherboard, I've since changed it to the current one, which is MUCH better imo
[table][tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16813131172]Mobo[/td][td]$71[/td][/tr]
[tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16819103210]CPU[/td][td]$66[/td][/tr]
[tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16814131066]GPU[/td][td]$68 w/ rebates[/td][/tr]
[tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16820227269]RAM[/td][td]$48 w/ rebates[/td][/tr]
[tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16817341010]PSU[/td][td]$50 w/ rebates[/td][/tr]
[tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16811147073]Case[/td][td]$34[/td][/tr]
[tr][td][url=http://www.newegg.com/Product/Product.aspx?Item=N82E16827106263]CD/DVD Burner[/td][td]$25[/td][/tr][/table]
------------------
$362 after rebates
That's only slightly more than a sexbawks 360 these days, but so much more capable of playing sweet games. :p
edit: I also have an old ATi x1950 Pro sitting around somewhere, if my little brother doesn't claim it by tonight, I'll bump this with an offer to mail it to you, since nobody wants it. :'( That would save your friend an extra $68, bringing the price to $296 w/ rebates :o
edit x2: It looks like my little brother called dibs on the vidya card, so no go on that. :-\