I'm getting bikes for two of my friends. I biked up a Bianchi Milano on Craig's List for about $250. That's a bargain. And lucky. But that still leaves my other friend. If anybody is trying to sell a good city bike for a guy around 5'10", let me know.
I bought a built 26" rear wheel with a sach/sram internal 5 speed hub on e-bay last night for $150. So I think the rest of the bike will be build around that.
This bike should have upright handlebars and a light steel frame.