Alright, I've built quite a few $500 and less systems over the past couple of years and consider myself to be the Cheap Mastah!
Anyhow, my rule #1 - don't skimp on the motherboard! If you get one of those cpu/mb combos or get your motherboard from some no-name folks, you will have problems with it for the rest of it's short life! Spend $20 more and get a good MB and skimp on the rest of the parts

Refurbished motherboards and other items are generally good deals and work perfectly.
If buying cheap ram, always buy ram that is rated higher than what you will be using - The pc3200 ram I suggest may not run perfectly at it's rated 400mhz, but it will run at any speed below that.
Used items may be bad - It doesn't happen often, but if you buy something used, you have no idea if the person cared for it properly or if they like to ship with wool packaging or something. You also have no warranty or guarantee that it will work and you most likely won't get your money back if the item dies 7 days later. Also don't buy from people with no feedback, no matter how good the deal may seem unless they ship first.
Here's something I put together real quick:
$35 Monitor (you already have)
$30 Geforce4mx pricewatch
$46 CPU xp 1800 pricwatch
$10 generic heatsink/fan (can usually find a good non-generic one for this much on the for sale forums)
$30 MP EPOX EP-8RDA3+ nforce2 pricewatch (out of stock, also can be bought from epox.com refurbished area for cheap)
$46 80gb hard drive pricewatch
$29 256mb DDR generic pc3200 ram
$24 CD-RW drive Samsung - SW-224R pricewatch
$0 Keyboard, mouse (wait for some free after rebate deals)
$0 floppy drive - no one uses these anymore anyway

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$250 total (wow, I wasn't even trying to get exactly $250)
Upgrade alternatives and recommendadions:
Used video cards give you a great performance ratio per dollar. And if you play 3d games, you should get at least a geforce3 (not a mx).
Alternatives:
http://forums.anandtech.com/me...5&threadid=1451428
$38 Geforce 3
http://forums.anandtech.com/me...5&threadid=1457000
$65 Geforce4 128mb ram
Other replacements that may make good ideas:
$75 XP 2700 pricewatch (if you want more cpu power)
$58 Corsair XMS pc3200 256mb pricewatch(if you want ram stability and overclockability)
$45 Abit NF7 nforce2 motherboard Pricewatch
$52 MSI K7N2 Delta-L nforce2 motherboard pricewatch (both are good new motherboards)
$70 pioneer dvr-108 (one of the best dvd burners out)
Oh, and it looks like I left out the case/power supply. I think you can still get these for around $20 shipped. And don't worry about having a generic power supply unless you'll be running multiple hard drives/devices/fans/etc. The fad of blaming all system problems on a cheap power supply will pass soon
