Just remember you get that you pay for so - meaning the cheaper you go does not necessarily mean better quality in service
Happy Trails - Be sure to check out the Offers Section - Personally i would recommend www.apthost.com
Definitely - do not expect the world for $5/month. You generally will get what you pay for (not always). Do some research into a web host before you sign up, make sure to ask them a lot of pre-sales questions. The more answers they can give you and the more detailed those answers are the more likely you are to get a high level of custoemr service.
Reading your post makes it look like you are advising him to go with an overseller. Not saying you are just noting what it sounds like.
Not that for a small site an "overseller" is necessarily going to be bad. It's those kind of customers they really want after all. The problem is their ability to keep the servers running smoothly, which varies wildly between providers.