I would suggest starting with a AMD powered option based on the nForce 420 chipset (or the equivalent nForce2, if it's available yet). You get audio, video, LAN, etc all built in which saves a lot of cost and configuration problems. The nVidea built-in video is adequate for DVD playback, unlike others. Just add an Athlon 1800+ (or better), 2 x 256MB DDR (to use the twin bank memory architecture), a big 7200 rpm hard drive, a DVD player, a CD recorder and your are in good shape. With nice case and a good power supply (Antec or Enermax) you'll be around $500.
You'll have to add the operating system and a monitor on top of this. You can find components to go cheaper but you'll have a lot less value.