LoneWolf, he's in Canada, so you'll need to use the Newegg Canada site.
The GeForce 6800GT would be okay for that game. It might not do maximum settings with full AA/AF at maximum resolution, but I'd wager the CPU is lagging things more (especially if the lag is during towns or around areas with high player counts).
If he's willing to upgrade and spend $200, see if this sounds convincing to him. It's an overhaul of the core of the system. As it includes a new motherboard, you'd need to reinstall Windows, but you already sounded prepared for that anyway.
Motherboard
Newegg.ca - GIGABYTE GA-P31-ES3G LGA 775 Intel P31 ATX Intel Motherboard - Intel Motherboards
Trust me from experience, it's a great motherboard that can do decent overclocking.
CPU
Newegg.ca - Intel Pentium E5200 Wolfdale 2.5GHz 2MB L2 Cache LGA 775 65W Dual-Core Processor - Processors - Desktops
RAM
Newegg.ca - WINTEC AMPO 2GB (2 x 1GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual Channel Kit Desktop Memory - Desktop Memory
If his RAM is already DDR2, you can decide to maybe drop off needing RAM from the list.
GPU
Newegg.ca - GIGABYTE GV-N98TOC-512I GeForce 9800 GT 512MB 256-bit GDDR3 PCI Express 2.0 x16 HDCP Ready SLI Supported Video Card - Desktop Graphics / Video Cards
I'm not sure why that's just about the cheapest 9800GT card, since it has a native HDMI port and a custom cooler, but it seems like a steal. It's even cheaper than all of the 9600GTs. Someone make sure I'm not missing some catch.
Before anyone asks, you could go with a E7400 and 4GB of decent overclocking RAM, but that adds ~$100 itself.
It's over $200 ($266.96 [242.97 without RAM] before shipping), but $200 is kind of hard for a new motherboard, CPU, GPU, and RAM, especially if you're talking $200 Canadian. He may have to stretch it (and if he's willing to stretch it more, go for the E7400 and 4GB of RAM I initially mentioned).
Otherwise, he'd be wasting money on a GPU or CPU alone. They'd net too little a return. The GPU would be a waste upgrading for that game (especially since the CPU that's already a decent match for the 6800GT would lag anything much faster), and I doubt the motherboard will take much faster a CPU either. I hate to say it, but that system's at it's end. The 7600GT is a nice bit faster than the 6800GT, but that was honestly not a big enough increase to warrant it. The build above, even though it's budget level, would be worlds better than what he has. If you don't want to waste money (sometimes, you have to spend more for more parts in order to really get your worth with PCs, or a single part may do next to nothing), then it's all or nothing really in a situation like this.
Just check the PSU make (brand), model, wattage, and one specific specification, the number of amps on the +12V rail, to make sure it' up to task (though this hardware should be powered by just about anything that's not really underpowered and/or crap).
Edit: A Core 2 Duo at the same frequency is much faster than a Pentium 4 at the same frequency, especially in cases where the program can use more than one CPU/core. To give you an idea, the lowest Core 2 based CPUs (the old 1.8GHz Pentium Dual-core E2160) was around par with the faster 3.xGHz Pentium Ds, while at the same time, running cooler (less fan noise) and using less power (less electric bill).
