This is a budget build and I will buy a new Duel Core 65nm processor when they come out and a new DX10 Video card when they come out. I think the memory is a great deal for some overclocking memory and Epox has good overclocking boards. So I plan to overclock the crap out of this cheap processor while I have it. So tell me how I did.
Motherboard: Asus M2N-E <--- SLI is a waste of money unless you are going to be gaming at resolutions over 1600 x 1200. There is also no benefit to SLI'ing 2 7600GT's. You only get a worthwhile performance boost when there are 2 7900GT's or higher involved.
Overclock the 3700+ to 2.7ghz (FX-55), and this will last you until you decide to go for Conroe (or indeed, AMD have something to rival it, which will probably need a new socket by then anyway). If you get a good one and have a good cooler then with some extra voltage you could probably hit FX-57 (2.8ghz) with ease.
Simply put - the above system with a tasty overclock is a similar outlay to the one you suggested (save on the RAM, a little more on the CPU/MB) but would DEMOLISH it in games. In fact, you would get higher FPS than most current high-end AM2 setups with the same graphics card.
You just want to make sure you buy a good CPU cooler (dont forget Arctic Silver 5) to handle the overclock. It also takes a fair amount of tinkering to sustain it (you will need to increase the CPU voltage and change the RAM frequency to accomodate for the raised FSB).
PS. Yes, the 7600GT will be a bottleneck. Consider saving for a 7900GT or X1900XT which would be more on par with this system.
The benchmarks actually show where 2x512 MB sticks of RAM beating 2x1024 MB of RAM.
Now, the following article does use 2 x 1 GB worth of memory and states: "1GB is sufficient, but Oblivion appears to do a good job of making use of additional memory; load times and area transitions are noticeably quicker with 2GB of RAM. " So the question is how many other games out there make use of the additional memory?
In this benchmark, the 4200 X2 beats a single core 3800. So how does DaveUK have a 3700+ beating all dual-core AMD's up to 4400+? Now oc'ing the 3700+ that would be the case. But since I mentioned the 4200+ could be overclocked to 3.0 GHz, the single core 3700+ will not match it.
Get the X2 4200+ AM2 as it's easy just to buy more memory and pop it in if you decide you want 2 GB.
Considering that you specifically say that the CPU is temporary and waiting to be replaced with a 65nm X2, I'd say the CPU will do until then. If you want to have the option open for SLI, the Asus M2N-SLI is also a good board. If not the A2N-E is fine, but you may have difficulties finding 800 MHz DDR2 for it as that boards max DDR2 voltage is 1.95V, while most 800MHz sticks are above 2V.
The OCZ memory is good memory, but has been known to have issues with AM2. Corsair or Kingston is in this case a safer choice.