The Xtreme Gamer works fine in 7, the problem is that the rest of the computer is so old that there is little to no support for any of it in 7. It is the lack of any proper motherboard/chipset drivers that is the problem.
Starting with the motherboard,
Intel i850 chipset, that hasn't seen a driver update on over 4 years. The last networking driver from Asus is over 7 years old. The video card (FX5200) isn't supported under 7. The only piece of hardware that you have listed that doesn't have actual Windows 7 support is the X-Fi.
While 7 may install, it will be stuck with whatever it has included in the way of motherboard/chipset drivers. Anything else will be modded.hacked drivers as Intel declared that chipset EOL years ago. While it is nice idea to update the OS for your friend, it would be a better idea to leave it with XP, and tell him to wait till he has a computer better suited to running Windows 7.