For building rigs on a budget:
Micro Center and Best Buy. Check out the deals every week and get your components on special one by one... Some guys will save their cash for months to build a rig while letting many offers and specials pass them by, only to pay MORE for the same stuff when they buy it all at once.
Don't start with a set of components in mind, just see what they have and for how much and build from there. It took me about 2 months to buy all the different parts for my PC but I spent waaaaay less than if I had bought it all on the same day...
I started with a 750 Watt power supply that went on special, then moved on to a Quad-Core that dropped in price down by about 30% and then went on to buying a mother board once I had picked up my processor. I built the rig with a 2gig stick of ram just to get it working and load the OS and two weeks later some Corsair 2gig sticks of PC8500 RAM went on special so I picked up 4 of them.
Just took my time and got it all one part at a time. With your budget, you can build a monster PC if you just hunt for the specials and take your time.
Make sure to match your components well, specially the CPU and MO.
As far as the specs on your system:
-I suggest you go with a 10,000rpm HD or bump it up to a SSD. Even if you get a smaller capacity SSD to run your OS and have a secondary 7,200rpm for storage. I run my OS on a 10,000 Raptor
and a 1.5TB 7,200rpm seagate for data...
With Quad-Cores and systems with 8gigs + of RAM, more and more the HD seems to be the biggest bottle neck for performance in systems today. You can upgrade your memory and maybe not notice much of a difference in performance at all, but putting a faster HD in your rig will be like night and day. It even makes the boot time much quicker.
If you go with a 10,000rpm HD then screw a dedicated HD fan right on that bad boy.
-I'm not a huge fan of AMD or ATI. I own two laptops with AMD processors and ATI graphics and they work just fine, but I still prefer Intel and nVidia for custom builds even if the price is higher... I don't really have much to support this argument other than saying I just "prefer" Intel and nVidia over the AMD/ATI set up.
Alright you homos, what do you think of this config:
* CPU: AMD Phenom™II X4 955 Black Edition Quad-Core CPU w/ HyperTransport Technology
* HDD: Single Hard Drive (500GB SATA-II 3.0Gb/s 16MB Cache 7200RPM HDD)
* MOTHERBOARD: MSI 770-G45 AM3 770 Chipset CrossFireX Support DDR3 Socket AM3 ATX Mainboard w/ 7.1 HD Audio, GbLAN, USB2.0, SATA-II, RAID, 2 Gen2 PCIe, 1 PCIe X1, & 3 PCI
* MEMORY: 4GB (2GBx2) DDR3/1600MHz Dual Channel Memory Module (Corsair or Major Brand)
* SOUND: HIGH DEFINITION ON-BOARD 7.1 AUDIO
* VIDEO: ATI Radeon HD 4650 1GB DDR2 PCI-Express DVI-I & TVO [-47] (Major Brand Powered by ATI)
I have a sound card on my comp now that will suffice. All this + Windows 7 for $820 doesnt seem too bad.