$106.47-$20MIR=$86.88 - Ultra MicroFly w/400W V-series PSU (price estimate given 8.25% sales tax)
$99.99 - Western Digital 500GB hard disk
$67.00-$30MIR=$37.41 - 2GB (2x1GB) Corsair XMS2 DDR2-800
$53.32 - Gigabyte GA-M61SME-S2 integrated motherboard
$35.00 - Sempron LE-1100 "Sparta" 45W
$27.99 - Samsung DVD burner
$0.00 - Ubuntu Gutsy Gibbon
TOTAL: $389.77 - $50MIRs = $340.59
I've never owned a MicroFly, but it looks *really* cool from where I sit. It's the smallest PC case I've ever seen which can accommodate both an ordinary (mATX) motherboard and an ATX power supply. The retail version from Fry's comes with a 400W Ultra V-series PSU (except with shortened cables). I *do* own one of these, and although it's not the most reliable PSU in the world, it's plenty of power for what you need, and it does have over-voltage protection.
I suggested a 500GB hard disk for a couple reasons. First of all, at just over 5GB per dollar, it's the most bang for your buck compared to other capacities (320GB, 250GB, etc.). Second, since you apparently want this to download data, it seems like a good idea to have an excess of disk space. If you don't need that much, though, or if reliability is a greater concern than sheer size, try going for a dual disk setup in RAID 1. The MicroFly has two internal 3.5" bays, and the GA-M61SME-S2 has RAID 0/1, which means you wouldn't have to worry about changing those choices. Alternatively, if price is a major concern, you could just stick with a basic 160GB disk for about $50.
Corsair offers their 2GB XMS2 kit for $37AR, which I think is a pretty nice deal. If you don't want to deal with rebates, though, you could try the Wintec kit, which is something like $47. I wouldn't get less than 2GB, though, since it's only a *little* bit more expensive than 1GB, nor would I go under DDR2-800 speed, for the same reason.
The Gigabyte GA-M61ME-S2 is a neat-looking board from a reliable manufacturer, based on the aging but solid GeForce 6100 chipset. It's cheap, but has sufficient features such as overclocking (and presumably underclocking) control and RAID 0/1. I can't think of a better choice for the mATX AM2 platform.
I've found Intel's low-power solutions to be a bit too expensive given their performance. The Sparta 45W series is a nice but inexpensive AM2 chip, and you might be able to get away with passive cooling if you underclock it a bit (which the Gigabyte board *should* be able to do). I don't think spending extra money for a faster CPU is a great idea unless you're going to be using it for more than just a download/internet machine--and especially not if you plan on underclocking.
I suggested that Samsung DVD burner for the simple reason that it is the cheapest drive I would trust to do its job. I don't see much use in pumping more money into that component.
Finally, Ubuntu Gutsty is my favorite Linux distro. However, you can run whatever you'd like, as long as it's free. If you do choose to buy Windows, that's okay, but I wouldn't recommend it for your stated purpose.
Good luck!
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