If your friend wishes to maximize the gaming performance out of spending approximately $70, purchasing the 9600GT is CLEARLY the way to go.
If his PSU is operating properly, it will handle that card - some manufacturers list the minimum power requirement as 400w while others only require 350w. It would be nice to get a new PSU, but clearly not in his budget and not the way to spend his budget to maximize game play.
The 9800GT is a faster card - but about $25 more, and more than your stated budget, plus it requires more power. I don't understand people recommending the 4670 over 9600GT for power reasons as the former uses more power. See this link.
http://archive.atomicmpc.com.au/forums.asp?s=2&c=7&t=9354
Increasing RAM would also be nice and a second choice - and if he has open slots another 1GB of value RAM should not be too expensive - but it should only be second choice after getting the faster graphics card.
OC might be a good, no cost option, to speed up game play a little as well as other activities, if his system and mobo support it - but you have told us nothing about it so I don't know. If they do, I recommend getting (borrowing if possible) a Watt Killer or similar device to first measure his actual consumption before starting since this too requires more power. Adding the video card should not be a problem, but I suggest checking actual usuage before then afterwards also OC.
You might also run his complete system with a power calculator also to check:
http://www.extreme.outervision.com/psucalculatorlite.jsp