Windoze XP Home Edition for under $100 as long as you keep your receipts for mother board, hard drive, RAM and a CPU. But as it's been said already, if all she does is light internet use Ubuntu's probably the way to go, especially if she's got a savvy uncle to set the whole thing up for her.
I would say though, that it'd probably be a good idea to have her make a list of the applications she can't live without in case there's anything on there without a Linux equivalent.