Will vista home basic run smoothly on this system

Yes, and then some. Don't even worry about it. If you were going to run the Aero package that might be a minor bottleneck on an integrated graphics system, depending on the chip used, but since Vista basic doe not even include Aero there is no problem here at all.

The stories of Vista's piggishness or sluggishness have been GREATLY exaggerated. 2.5 gig of RAM is plenty to get Vista running as smoothly as XP even with integrated graphics.

Well for games and video yes indeed, a huge difference, for general windows stuff I would think it would help but I can't say how much exactly. Like I say I think you will find it runs very smoothly even on the integrated video. I have Vista Ultimate running on a laptop with 4 gig RAM, a much less powerful CPU then you are getting and integrated ATI video and it runs very smooth - even with Aero enabled. So I suspect what you are getting will do the same at least.

It helps to have a self-built PC that doesn't have all the crapware that is pre-installed on brand PCs. More often than not this is what makes some Vista PCs feel sluggish, and XP machines too for that matter.

We should also add that a lot depends on what the integrated graphics chip is - I don't stay on top of the various integrated chips so I am assuming it will be a weakling, I suppose there are some exceptions to that rule