There is a really nice highway one strat on ebay for 500.00 BIN
He did say acoustic, just as an FYI.
I have an early 80s Takamine F360S, which is a solid-topped version of the Martin D-28 (which got Takamine sued by Martin for the design). It's the 2nd one that I've owned (the previous was stolen), and when I A/B'd it with some of the $2000 guitars at Guitar Center, it definitely had a sound that was comparable to, but obviously not on the same level as, those guitars.
They typically run under the $500 mark, which will allow him to get a hard shell case and the other things that allow one to care for and maintain an acoustic, depending on where they live.
The Epiphone Masterbuilt guitars are incredible guitars for the $. If you have a GC nearby go and play one...you will not be disappointed.
All the Canadian guitars in the Seagull, Norman, Simon & Patrick, etc. lines can be pretty good, and great bargains.