I remember the xbox having red ring issues pretty bad
No where near as bad as the idiots that blew it out of proportion would want you to believe.
has the quality improved over the years ?
Quite a bit, especially with the Slim.
Second, should I buy new from Walmart I'd gamestop or try looking for a deal used like Craigslist.
You should never buy a console used, especially this gen, you have no idea what the previous owner(s) did, or didn't do, to it or around it.
Also, warranties are a wonderful thing, for any electronic device.
Third, which model should I get. I wanna play online primarily with him but also stuff like skyrim, dark souls, and fighting games. How much memory should I be looking for
You either want the 4GB Slim (the 4GB storage device is a flash drive attached to the motherboard that is preconfigured as an Xbox 360 Memory Unit, in other words, it does not qualify as an HDD for those features that specifically require an HDD) and the separate 320GB HDD (currently comes with a code for Lego Star Wars 3, a $20 value, starting in March it will come with NFS Hot Pursuit, Ms. Splosion Man, and Pinball FX2 with Sorcerer's Lair), or the 250GB Slim, or a Special/Limited/whatever Edition 320GB Slim, such as the Gears 3 and Star Wars Edition Slims.
R.I.P. Eve English (Feb. 12, 1968 - Oct. 13, 2010) Momma Eve, you will be missed.