Best simple engine upgrades are (as 289 stated) underdrive pullies (about $100.) and cold air induction is good but expensive for the tiny gain you get (minimum of $100.).
Advancing the ignition timing (14 or 16 degrees) is free and can make a noticable difference from the stock 10 degree timing.
Beyond that, installing an H-pipe is a good power modification if emissions isn't an issue for him. Cost around $100. If it is, a low-restriction cat system works well but costs a lot more; around $300.
Not an engine modifcation, but better rear gears are a baseline Mustang 5.0 mod. 3.73's are the gear of choice, possbly 4.10's for an AOD-equipped Mustang to compensate for the crappy trans gearing and power loss through the tight converter.
Converting to stick costs around $2,000. This assumes a new T-5 and shifter (about $1,200.) as well as a new clutch, PP, bearings, flywheel and clutch adjuster (another $400.) Pedals, bellhousing and other parts that fill out the list can be bought used at a junk yard.
It's been done many times. The AOD will crap out if it's pushed too hard so either way, your bud will have to spend some money if he wants to race it, much less make it quicker.
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