If you have a Gamestop/Eb games, its worth buying the Xbox their and getting the extended warranty so if anything happens to the system within the year of the warranty, you can get a new replacement one, no questions asked. I think Wal-Mart is also doing product replacement plans but their not as flexible as Gamestops and iv'e had to replace mine, and its really easy and the best extra $40-$50 you can spend.

As far as games, thats gonna vary GREATLY from person to person. What one person loves playing another person is gonna hate. Are you going to get him an Xbox Live gold account? If so, i'd have him download free demo's and go from there. If no Xbox live, rent a few from the store or borrow some of his friends. You can also purchase used games at gamestop and they guarentee them for seven days so if he doesn't like it, he can return it for exchange/refund unlike new games where once you open the package, your stuck with it.

I'd do at LEAST the current Xbox Elite that comes with the 120gig HDD, because thats were you store all your demo's and if you just get the Arcade version with no HDD, your gonna spend ALOT more for getting a seperate HDD, so do it right the first time. The COD MW2 package deal is nice, but its a premieum $400 and he may or may not like the Call of Duty series games.