I would go with the Mac Mini. The mini should come with snowleopard and ilife. As far as installing the new software on an older purchase I don't know. Just have to try, If not you can always buy the upgrade
There is no way to get free software, period. You can probably find it at discounted prices around the web.
It depends on how old the system is that he wants to upgrade - you can check the system requirements online.
you might want to check on compatibility issues, tiger was a ppc operating system and leopard is a intel release. if you want free software go opensource. theres no other way and there are some really good apps out there. like gedit for text editing and the such. if you do use illegal software it will only cause you more problems in the future.
You can upgrade your mac version by buying the installation disk. it cost $29. Or you can upgrade the mac version by going software update. Software update is free. But i not so sure it will work on tiger. As the mac version is too old. I would recommend mac mini or macbook pro. Macbook pro is fast and have a larger memory space