Question For Those That Watch Movies/TV Through Your Two Channel System

My thought was to do away with his small center channel speaker and replace the AV receiver with an Integrated Amp.

This is exactly what I do... you just need to make sure the audio is down-mixed to stereo as someone else suggested. The process mixes centre channel into the left and right speaker signals equally and with no attenuation. You do lose the low frequency effects channel though so if that's important to him he'll have to stick with multi channel. 

I put the HDMI through a switch that also provides an optical two channel PCM output so I can use a decent DAC for the analogue conversion. I wouldn't advise using the analogue outputs on any if the switches I've come across though.

@ericsch The primary benefit of a center channel is to lock the dialogue (or other centered sounds) into coming from the location of the display for people who are not sitting equidistant from the left and right speakers (assuming the main speakers are located symmetrically and equidistant from the center of the display).

If everyone sits "in the middle" then a center channel isn't needed, since dialogue will sound like it is coming from the center when reproduced by your left and right speakers. However this is unlikely in a home unless everyone is far away from the display. The possible distraction of dialogue not matching where a viewer sees the speaker, for someone sitting off-center, might be more of a quality loss than whatever improvement you get from using higher-quality 2-channel equipment.

Adding 2-channel equipment with HT bypass as suggested by @bkeske would be the easiest way to get any sonic improvements for music listening while still maintaining the status quo for movies and TV watching. But it means more equipment and a slightly more complicated setup.

Hi Erich,
A center channel is better than using stereo speakers, but only modestly so and works best with automatic room correction.

For reasons related to head transfer, a center channel actually does sound different than a phantom center, even if you are sitting in the middle, but the effect is not gargantuan. 

Best,
Erik

I should also say that if you do use a center, it should be matched, or at least reasonably the same quality as the sides.

Using a very small center, with limited dynamic range and power handling, with a L/R pair that is not as restricted will show up at moderate to high volume listening.

Eric, I think most of the issues have been covered by those above me.
Unless the sound source is miles away our vision can an does override our hearing and speech will be localized to the individual talking. With a good system imaging correctly a center channel is totally unnecessary and maybe even detrimental. If you look at my system you will see a very big screen and no center channel. I do not even use surround speakers.
I would rather put the money into my 2 channel gear. 
Set the system up and live with it for a while. I suspect that you will not feel the need for a center channel.