Not really. Perhaps if his iMac were a 20" instead of a 17", the cost would be similar.
Core Duo Mac mini - $800
20" ACD - $800
Apple Keyboard and Mighty Mouse - $80
Total package is about $1,680. Almost $400 more than a 17" iMac Core Duo and almost the exact same price as the 20" model. (This is, of course, before any hardware upgrades, but you get the idea.)
I'm not necessarily saying you would be getting a great deal in this trade, especially considering the difference in specs between the two machines. It just depends on what your individual needs and preferences are.