which is your favorite inexpensive stereo system?

Go to Audio Advisor website and take advantage of clearance (if they have any left) of Cambridge Audio 540A or 640A amp and matching CD player, or if friend wants FM, the NAD C-720BEE Stereo Receiver. Many good bargain priced speakers available from NHT, PSB, Paradigm, Polk, etc.. With all due respect to some of the previous recommendations in this thread, some are fairly esoteric, and my guess is that if your friend is not an audiophile, he (or she) will prefer a solid, reliable, fine-sounding piece like the NAD or Cambridge to a tube amp.

I agree with Bob, again. Another example would be a new NHT M-00 and a S-20 and NHT PVC for $900 and then add a CD player - surely your friend has a CD player already? If not there are many decent CD players that you could pick up used or on sale for another $100.

The S-20 features a 200-watt RMS built-in amplifier incorporating low and high-pass filters and a foot-switch for bypass. Its driver is a long-throw treated-paper eight-inch woofer providing output down to 33Hz.

The M-00 has 75 watt built in amp. You would be amazed at what this small setup can do.

Used Arcam Solo Mini ($650), Mission 72M speakers ($200), the balance for speaker cables, stands, Reflect FM antenna and microbrew. Solo Mini sounds noticably better with the hood up. Remove the casing and it's more open sounding. Weird, huh?

Shop carefully on Audiogon for the following:
Magnapan MMG or PSB Alpha B-1 and sub
NAD intergrated or receiver
OPPO or NAD player
You may need to start with inexpensive cables that can be upgraded later.

Lots of good recs here, and the NAD theme is a good one. Buying used on the Gon for $1000, a system that would be amazing for acoustic music and get the midrange right for everything:

Spendor S3/5 ($500)
NAD C325BEE ($275-300)
Oppo 970/980 ($125)
Cables from Markertek (~$50)

Like the front-ported KEFs mentioned above (I had the Q15s in my first 1K system, and they kept me happy for 10 years) the sealed Spendors would give flexible placement options should your friend need to set them up on a shelf or near a wall--often a reality for people getting started in the hobby. Plus, the Spendors are tiny and beautifully made. A set of speaker stands and a cheap sub would be an easy upgrade path down the road.