Sometimes there's no ceiling, so a diffuser is handy, and there's many other benefits to primes and fast apertures, not the least of which is better image quality.
For $110, the 50mm 1.8 is hard to ignore, especially with the image quality you can get for that price compared to any of the lower-priced zooms. The biggest drawback I've found is that the 50mm focal length on crop-sensor cameras can be a little tight indoors.
The 55-200 focal length isn't as versatile indoors, and outdoors with shorter focal lengths you can usually zoom with your feet. The 55-200 focal length would be good to have for ball games, recitals, and school plays but the aperture range is limiting in low light, especially at full zoom.
He already has an 18-55 and can expand its usefulness with an external flash. JHC77, I still think that's your best bet given your budget. Look for used or refurbished equipment, and you could probably get the 50mm 1.8 and an external flash and improve your capabilities exponentially. Beyond that, it's time to look at investing more money. Canon has some well-built primes at decent prices compared to the zooms that deliver similar image quality.