Piggles,
I wouldn't worry too much about his undergrad degree- there are ways of proving to a highly-ranked school's adcom that he can do the work required- GMAT, community college classes, recommendations specifically talking about his analytic skills, etc. Plus I have a feeling that grad schools will start to see more enlisted guys getting their degrees from distance learning centers with all the deployments and very unstable work cycles they have had to deal with. I think enlisted guys are going to get looked at as having their first military contract as their college 'experience'- something arguably more prestigious and challenging than doing kegstands and bong hits at Party U for 4 years.
If he's as smart as you say he is, he should be looking at a 700+ GMAT and could get into a top-20 program IF he has an interesting story and can prove that he has the intellectual horsepower to hang with his other b-school peers. Don't discount the military service aspect either. It is turning into a total wildcard for the applications process- at least for me.
More concerning though is going to be his work experience- how long has he been in? What's his career goals? He's gonna need a coherent story to show that he needs an MBA to reach his dreams, and why school X in particular.
To prevent him from going the online route you might want to show him a couple studies showing the salary difference from MBAs from top ranked schools and those from Distance Learning institutions.. the numbers speak pretty strongly for themselves. Better yet, encourage him to actually VISIT a b-school or network him with one of your current b-school friends to show him what it's like.
For people who have never been to college, and compared to the travesty of military 'learning', I'm sure the business atmosphere at a top school would totally blow him away and make him want to go to a brick-and-mortar place.