Do you have a preference for Intel or AMD?
If you want Intel, its best to either wait for conroe to come out, or grab a conroe compatible MB now, and plug a cheap CPU in it until conroe comes out.
If you want AMD, socket AM2 offers the greater upgrade potential (vs 939's non-existant upgrade potential), but 939 offers the more mature chipsets and MB's, so you probably won't encounter any hardware issues with a 939 system. If you want a single core CPU, go ahead and buy now, AMD just cut their prices on the single core lineup. If you want dual core, either wait for the price cut on those (~July 24th IIRC), or buy a cheap single core and upgrade when the duals' prices come down.
No matter what course you take, you will have to upgrade CPU, MB, GPU, and ram (unless it is DDR400, which I seem to recall was not supported by the 2500 XP's), maybe even you PSU, depending on whether it is new enough to support modern processors.
In any event, you can build a decent gaming rig from scratch for under $800, if you are prepared to get down and dirty searching for the lowest prices.
For example (just shopping at ZipZoomFly):
AMD socket AM2
Athlon 64 3800............................$149.00
Asus M2N-E nForce 570...............$109.99
GeIL 1 GB DDR2-800 (4-4-4-12)...$119.99
EVGA 7600 GT CO........................$175.50
Seagate ST3250824AS 250GB.....$88.99
NEC ND-4750A.............................$44.99
Coolmax CV-850..........................$19.99
Enermax Liberty 400W................$75.75
Total............................................$784.20
This is assuming that you keep your monitor, keyboard, and mouse. You can also likely find some of these components cheaper at other retailers, but you'll also pay shipping for them (ZZF ships free).