I agree strongly with those who say that the LBS's should carry solid $200 bikes. They should have:
1) 5-6 speeds, only on the rear derailleur. No new cyclists use more than that.
2) Slicks for city riding.
3) Relatively relaxed geometry.
4) A front basket.
5) 3 options total:
5b) Seat type
5c) Handlebar type
I guarantee you that several manufacturers are perfectly capable of building a $200-220 bike to these specifications. It doesn't have to be particularly light, and it doesn't have to be made to stand a lot of gear-grinding.