He won't loose his data as that's stored on the hard drive/removable storage and also on the xbox live servers (and the error message he is getting is not related to that stuff). If the console is still in warranty xbox offer a really good repair service, but I'm assuming it isn't. There are places that say they will fix it, and there are a million online references to fix it yourself as this is not an uncommon problem.
If the worst comes to the worst and you have to replace the console you can rest assured that he'll not have lost any data as long as he keeps his old hard drive!