Did your friend use the original rear wheel? If so I'd just get these things:
1. 7 speed Shimano freewheel
2. 7 speed (or friction) downtube shifters
3. SIS cable and housing
4. pretty much any SIS compatible shimano derailleur
5. New chain
Stick with the single chain ring for now and only use the rear shifter. Get the stuff off ebay or find a bike shop that sells old used parts for the shifter and derailleur. The freewheel, cable, cable housing, and chain should be new though. A few years ago Nashbar was still selling 7 speed downtube shifters. You could get them for $15 or so.
If you don't care about indexed shifting then you don't need to worry about getting a Shimano freewheel or derailleur. You can use any brand, however Shimano's HG freewheels shift pretty nice. If you do want indexed shifting you should stick with their stuff.
If you can use your current wheel, I bet it could be done for $75 or less.
Are the shifter bosses still on the bike?
Just so you know, modern combined shift and brake levers are going to set you back quite a bit which is why I'm recommending the downtube shifter.
Last edited by tjspiel; 04-20-10 at 08:45 AM.