As far as not seeing anything wrong with his set up, I can vouch for that. He has a pretty good set up.............but someone with...... say my other computer would be rendering the game faster. Its an A64 3200+, 1 gig Mushkin "Special 222", and a 9600 Pro. I know the video card is a little behind the time, but for me it works like a charm. I usually play Americas Army, FPS by all means.
You can't see anything wrong with his set up from just looking at it, you have to play it to fully understand it. These games depend as much on the processor as the video card. You may be playing at (for arguement sake) 60 Frames Per Second, and someone else Playing at 60 FPS. Now If he running my set up He will ultimately render the game to the monitor faster than your nephew. Thus seeing your nephew b4 your nephew sees him. I am not going to get into equating ping into this, that is whole other story. Hopefully you can see what my point of veiw is. I have played FPS on the A64 3200+, AXP-M 2600+ OC'ed to 2.6 Ghz and on a 1800+, all with the same video card. The A64 pretty much owns many other computers when it comes to rendering games. This is a fact of life, for gamers.
As far as overclocking the video card to an XT........ Its iffy that he will see any performance gain, as far as frames per seconds go. I have a buddy, that has a 9800 Pro, He oc'ed it to an XT. In game he saw 2 fps more. Is it really worth the effort and money for better cooling. IMHO....... NO!!!
On the subject of video cards, a clan mate of mine went out and got a 6800 GT and OC'ed it to Ultra speeds. I spent $170 on my dinky video card, at the time He spent $450 I think. In game he gets 15 fps more than I do.
So in real world performance, I would say have your nephew upgrade to A64 CPU (speed of his choice) He will notice the difference.