I understand you don't want value RAM, but keep in mind good OC'ing RAM (for 2x512MB) usually starts at $125+
If you want a rig that can play the latest games (granted not with all settings max'd) then you need to have a balanced system. I can tell you right now that HD space will become an issue for you. You already know that you need a new PSU, and when you have cash to upgrade and you plan on using these forums to sell your stuff then making a return on your purchase is possible.
Right now if I were you, I'd grab a cheap 2800+, some value ram off the boards because they're cheaper (if you do go this route only deal with people with a lot of heat since you have none, valuable piece of advice there) and a QUALITY PSU. CPU's and RAM are two things that are really easy to sell back quick on these forums.
My 2 cents, would hate to have you spend $300 on hardware and it won't even post because of your PSU.