which is your favorite inexpensive stereo system?

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.

$1500.00 could get him A LOT more than a grand.

Peachtree Audio decco would be a good choice.

Marantz or Parasound integrated posibly

Totem would be a good choice, definately bookshelf speakers

Right now it's hard for me to imagine that anything at this price will touch the active NHT system identified by Shadorne (and alluded to by Bob). There is, however, an explanation. NHT is "shutting down" next week - not sure exactly what that means - but pledges continued service and support. The current prices appear to be a clearance "give-away", at app. 1/3 of the (very competetive) original prices.

Marty

I agree with a Marantz integrated and CDP. Accessories4less.com has refurbished offers. I also agree with PSB but would consider Triangles like the Comete as a great stand mounted speaker that can be found at discount and can be a long term speaker... coherent from top to bottom and not bright.