From what I remember those E6600s were quite good little chips. Although they are getting on a bit.
I was thinking that you may be able to pick up a a new PSU and 7750 / 460 as above and also taking him into getting a new CPU, something like a Q6600 or similar (supported CPU list).
That would make a nice low - mid range gaming computer.
But I'm not too sure how else you could do it, The PSU needs upgrading before any new hardware is added and adding either the CPU or GPU on their own is going to make for a imbalance. Although you could live with it and add the CPU later.
Edit: looking at it it may not be too bad depending on the game.
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