Sennheiser HD555 sound really good with my dad's previous generation iPod Nano.
Nephew may have an issue with looks of the headphones while he is wearing them, though.
Audio Technica A900 might also work, but probably pushing just over $200 if buying new.
The A900 are likely way too big and bulky for a kid. I like them a lot, but they're not portable at all. Denon has a couple of portable headphones that should be in this price range as well (AH-D1100 and AH-D1000).
HD555s are good, but they're open so if portability or listening in an environment with other people will happen, I'd recommend close headphones instead.
Over the ear headphones for a 12 year old seem like a VERY poor choice.
Silly to wear outside.
Too large to carry when not in use.
You won't be able to tell if the music being played to loud potentially damaging hearing.
Sennheiser MX series are cheap and VERY decent quality. Everyone in my family has at least one set of the MX400 earbuds, and we routinely make our son turn his down. With sealed headphones he would likely be deaf by now.
This is terrible advice simply because earbuds are actually about the very worst headphones you can use as far as causing hearing problems. They don't fit well with human ears, which greatly impacts sound quality and necessitates turning up the volume to compensate. Just because you tell them to turn it down doesn't mean they aren't cranking it elsewhere (and there's a reason they're cranking it beyond just being kids and wanting to crank everything). Its not difficult to tell if the volume is too high on over the ear headphones, as even closed ones don't seal so well that if its too loud you can hear it.
IEMs are better, and while you can't monitor the noise levels as much, you likely won't need to as the extra isolation can help a lot with keeping the volume in check (getting a seal helps a lot with bass which is what they're going to want, and earbuds in general suck for getting bass). Same for closed over the ear headphones.
You can also install a volume limiter and/or adjust the gain on the songs to limit them.