Yes, but if you want to burn DVDs you'll need the Superdrive. Also, you'll get iLife '05 without iDVD (since you don't have a DVD burner). So if you do decide to upgrade in the future, you'll have to pay for a.) the Superdrive, b.) the installation, c.) iLife '05 with iDVD.
You definitely need more RAM, but don't leave off the Superdrive as a sacrifice. Trust me, I did this with my iBook and I regret it! Anyway, RAM you can upgrade yourself later... the Superdrive not so much.
As for USB hubs, any one will do. Mouse, keyboard, and digital cam don't need a powered hub.
That'll work for video, assuming he has an S-Video or RCA input on his TV (some older sets don't). For audio you'll need something like this to plug into the iBook's headphone jack: