M.N.
I love the idea of buying books too. I have three boys (4,3, and 3 mo) and we can never have enough good ones.
My boys LOVE Thomas trains and there is now a set for 18 month+ kids called Early Engineers. With Christmas coming up, there has been a lot of sales, especially on the Early engineers sets (new sets for as low as $8 or so). I like the trains that don't move or make sounds because it forces them to use their imaginations and works on their fine motor skills when they have to push them around the tracks. My oldest got his first train at a bit younger and still wants to play with them day and night.
Also maybe a riding toy like a fire truck or a car would be fun at this age. Good luck!
PS: I totally agree with the other moms - $40 is very generous, but especially with young kids you can get a great toy for a lot less:). He's very lucky to have such a sweet aunt!