They should look at buying a couple of Rebel T2i's with 50mm f1.8 mkII lens (total cost < $1,000). Remember the 9-second rule in video - never have the camera on one location/person for more than 9 secs (no matter what they're doing), use multi-cam to increase number of straight-cuts, plus looks infinitely more professional.
A Zoom H4n (<$300) 4Ch audio recorder is a necessity (or something similar), then pick up some used shotgun mics and some XLR extension cables (<$10 each).
Forget lighting for now, just too expensive for their budget, use 'daylight' its free!
Finally, they need to seriously consider what editing software they're going to use, after all, Adobe Production Premium CS6 would blow 100% of their budget, not to mention having really powerful PC/Mac to edit (need a serious graphics card either NVidia or AMD with at least 1 Gig of Video RAM to process HD video files). I spent 1.5 times their total budget on a custom-built PC that runs Adobe Premiere Pro with GPU-acceleration (utilising fully the Mercury Playback Engine). My other computer a 3Gig dual-core 64-bit Windows Professional laptop will not even playback full HD video in real-time (and it has a 17" 1600x1024 screen).
Seriously, they need to consider computer hardware + software too (unless they already have them) and I would advise doubling or trebling that budget. No point capturing great 1080p video if you cannot process or edit it.