Well, he wanted to just buy a new one, but I managed to convince him that spending $100 (or less) to replace the hard drive would be a better idea than spending $250 on a new iPod.
Replacing the drive itself will cost $100, then you have to factor in the labor costs. That could run your friend another $100. Your friend is better off spending a few extra bucks and get a new iPod.
If it's like a fifth gen ipod or earlier, I know for sure that it's really easy to replace the parts yourself. One option would be to ebay a drive for $70 and put it in yourself. There are a number of video guides online... if you're interested I could link you...