Quoted for truth. the 9xx series P4's were actually very good indeed and they even buried AMD CPUs for computationally intensive tasks, they just weren't that great for gaming.
Not really, they buried AMD cpus in synthetic memory bandwidth benchmarks when highly overclocked. It's true they were better performing that AthlonXP, the 32bit AMD processor, but northwood clocked at 2.4Ghz pretty much out performed the best AthlonXP processors at stock speeds. But Athlon64 crushed P4 clock for clock, and in most cases the lower clocked Athlon64's out performed even the highest clocked P4's in both gaming, and pure number crunching power. There was pretty much nothing in the real world that a P4 could do better than an Athlon64.
Intel didnt switch from the Netburst architecture to NGMA just for the gamers, it was to address a serious lack of computing power that the P4 suffered from. There is virtually nothing that a Core 2 Duo does worse than a P4 (apart from synthetic memory bandwidth tests), and the C2D does it at a fraction of the P4's clock speed.
As clock speeds go up on Phenom, and C2D, the old P4 Netburst architecture will only look worse and worse. To match the performance of a 3.2Ghz Core2 the poor old P4 would need to be close to 6.4Ghz! and probably drawing 250+ watts!. And thats not counting the fact that the first leaked info about the next Core processor (Nehalem) indicates another large jump in performance.
I would have thought a motherboard/cpu swap would be worth considering. Its a pitty the OP's friend just bought ram and graphics, as it will make the selection of motherboards very very limited. But there are a few MATX boards with AGP/DDR that support Core2 Duo.
The biggest reason why Intel were not much farther behind AMD, was because they managed the impressive (at the time) 3.73Ghz P4's. But considering a 2.2Ghz Athlon64 could beat them just shows how far behind AMD they really were. But those 3.73Ghz P4's were power hungry hot monsters, far less impressive than the Athlon64's.
Matt's probably right about encoding, but only just. Not sure what version of SSE the P4 and Athlon64 have, but on well programmed software that is coded for SSE, and has very few branches the P4 did "ok". But still clock for clock, and performance per watt it was a dead end technology.