I am currently a Canon shooter, but have handled various Nikon digital and film cameras over time. My current shooting partner is a Nikon user and when we're not shooting we trade comparisons (insults?!) about what's good and not about our respective cameras. Our common conclusion is that the best camera would be the one that incorporated the good things from both brands (plus a few from Minolta, as I regard them the kings of ergonomic body design). But let me not stray from the topic of discussion..
D70 vs new Rebel - which one to chose.
For a new DSLR user I think both the Canon Rebel and the Nikon D70 are capable cameras. I am inclined to think that the image quality is slightly better with the 8mpixel sensor, but usability issues and handling of the Nikon D70 are slightly better than the Canon. Overall though both are very well matched and I can't call a clear winner. I am a 20D owner and I feel the D70 is very close in quality to my camera.
The previous rebel was most definitely outclassed by the D70, the new rebel however is a closer match with more features per gram than the previous Rebel, more professional feel and response.
Your friend will therefore have to look at other factors in deciding which company to go for, as once you start buying more lenses, you are essentially locked into a brand..
Other things to look at are obsolescence. Canon turn over their consumer models every year. Nikon every 2. Canon has a habit of "crippling" consumer cameras to make sure that they don't compete with their pro cameras. Nikon on the other hand makes unstable lens collars that need to be replaced if you want a stable image, and you're never quite sure when the next model will be ready for release... Canon is much more reliable in that sense. Canon also predictibly lower the price of every newly released camera, bringing the price of DSLR's down. Nikon's marketing department does wierd things with pricing (see D2H fiasco).. I think because their accountants come from Mars. Then again, the recently upgraded D70s is very keenly priced. Nikon also tries to maintain their product lines for longer (see the D100, D1X models still on sale for those foolhardy enough to invest in old technology), in line with film day economics and pace of product development. Nikon has more or less stated that full frame cameras are not in their future, so if your friend decides he wants to go that route in the near or far future... Canon is the only one of the two with that option open.
Whichever way you cut it both manufacturers try to do things differently, just so they won't be accused of imitating (and praising) their competitor... and both Digital Rebel XT and D70s are going to be good cameras to shoot with even with these differences in mind.
How big are your friend's hands? The Rebel is quite a small camera, but feels snug in the hand. The D70 is larger and you can grip it more easily...
One last item... Nikon has been lambasted on the internet sites because of it's policy for encrypting raw files. Canon is not an Angel, but if I were buying a new camera and knew what Nikon's policies were, I would select any equally capable competitor camera that doesn't have the same policy about Raw file formats, and I would let a Nikon rep know about my decision.
Good luck, and hope this all helped.