Okay here is what I'd build and I'll try and state why along the way:
CPU - q6600 or e8400. I'd get the e8400 and OC to 4 ghz or get the q6600 and OC to about 3 ghz. Now there are different reasons for either one, but if your doing heavy video encoding or CPU intensive programs (that are multi-threaded) than the q6600 would be better. The e8400 is a solid CPU for anything, but might be a tad better than the q6600, especially when you OC it.
Intel Core 2 Quad Q6600 G0 Stepping Kentsfield 2.40GHz 8MB L2 LGA 775 Quad Core Processor Retail BX80562Q6600 SLACR
http://www.clubit.com/product_detail.cfm?itemno=A1938452
or
If you go to one of Microcenter's stores (if your near one) you can get one for $199!!!
Mobo - I'd go with a p35 mobo right now. I not a big fan of SLI/Xfire and believe it only works well for about 1% of gamers. SLI/Xfire is expensive and very power hungry too. You have to spend more $ on the mobo, GPU(s), and the PSU to run SLI or Xfire setup.
GIGABYTE GA-EP35-DS3R LGA 775 Intel P35 ATX Dynamic Energy Saver Ultra Durable II Intel Motherboard - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16813128086
GPU - I think you'd be better off with a 3870x2 than buying a SLI/Xfire setup. The card is good with any single slotted PCI-e mobo and performs very well. It's also around the $400 range, which for it's performance is pretty good.
SAPPHIRE 100221SR Radeon HD 3870 X2 1GB (512MB x 2) 256-bit GDDR3 PCI Express x16 HDCP Ready CrossFire Supported Video Card - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16814102723
or
EVGA 512-P3-N841-AR GeForce 8800GTS (G92) 512MB 256-bit GDDR3 PCI Express 2.0 x16 HDCP Ready SLI Supported Video Card - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16814130325
Memory - I think 2 gb's for most situations is good right now. 4 gb's is almost the standard, depending on the OS that you use. You can get 2gb's of CAS 4 DDR2 800mHz RAM for under $30 after MIR's!!! If you go with 4 gb's than you can figure around $70-$100 for a 2x2 pair.
2x1
Crucial Ballistix 2GB (2 x 1GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual Channel Kit Desktop Memory - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16820146565
2x2 gb set
Patriot Extreme Performance 4GB(2 x 2GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual Channel Kit Desktop Memory - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16820220269
PSU - I'm not much of a fan of Ultra PSU's, so you'd be probably better off with a better quality PSU, as you stated. I'd at least go with a Corsair vx450w PSU at the minimum. It has 33A on the 12V rails and has a 5 yr. warranty. The Antec Earthwatts 500w PSU is going for $60 on Newegg and it has 34A on the 12V rails, so that would be another good one to start with. Even if you go with the Corsair vx550w PSU from Buy.com, you would only be paying $65 (after $20 MIR) for a 41A on the 12V rail PSU!!
Corsair VX 450w Power Supply - CMPSU-450VX
http://www.buy.com/prod/corsair-vx-450w-power-supply/q/loc/101/205466485.html
Antec earthwatts EA500 ATX12V v2.0 500W Power Supply 100 - 240 V UL, CUL, FCC, TUV, CE, CB, C-tick, CCC - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16817371007
Corsair VX 550W ATX Power Supply - CMPSU-550VX
http://www.buy.com/prod/corsair-vx-550w-atx-power-supply/q/loc/101/205852646.html
Case - I'd go with either the CM 690 or the Antec 900 case, if you like the looks of either one. They are both quality cases and are around $100 or so, depending whether or not they have a MIR.
$86 shipped
COOLER MASTER RC-690-KKN1-GP Mid Tower Case Retail
http://www.zipzoomfly.com/jsp/ProductDetail.jsp?ProductCode=10006342
$120 right now, but usually can be found around $100 or less.
Antec Nine Hundred Ultimate Gaming Mid Tower Case Retail ***Free Shipping***
http://www.zipzoomfly.com/jsp/ProductDetail.jsp?ProductCode=140146
or if you want an affordable and solid case/PSU combo, look at this one:
$120 - $30 MIR = $90!! Nice solid PSU w/34A on the 12V rail. Can handle any single GPU solution out there.
Antec Sonata III 500 Black 0.8mm cold rolled steel ATX Mid Tower Computer Case 500W Power Supply - Retail
http://www.newegg.com/Product/Product.aspx?Item=N82E16811129024
CPU HSF - I'd go with the Xigmatech s1283 cooler. It's one of the best right now and is quite affordable, compared to the TRU (Thermalright Ultra 120 + Scythe 120mm fan). It's about $33 at Mwave, when in stock or about $44 at Newegg.
XIGMATEK HDT-S1283 heat-pipe direct touch w/ aluminum alloys cooler for amd (socket 754/939/am2) & intel (socket 775) processors
http://www.mwave.com/mwave/Skusearch.hmx?scriteria=BA24691
http://www.newegg.com/Product/Product.aspx?Item=N82E16835233003
Frosty's review of the Xigmatech s1283
http://www.frostytech.com/articleview.cfm?articleID=2233
Now these are ideas that I'd recommend. If you add up these together you'd get:
CPU - $250 (g0 stepping guaranteed)
CPU HSF - $33 Best affordable HSF right now
Mobo - $137 Will OC the q6600 quite nicely!
GPU - $237-$407 Depending on 8800gts (g92) or if you go with 3870x2
Memory - $30-$100 Depending on 2 gb's (2x1gb) or 4 gb's (2x2gb)
Case - $86 - $120 Nice and cool cases!
PSU - $60-$65 Depeding on which one you go with
HD - $100 or so for what you want
DVD Burner - $35 or so for whatever you like
LCD - $200 for your 22" that you listed above
Sound - $0 I'd recommend trying the Onboard sound first and if you don't like it than buy what you want. Most onboard sound is quite well. I use a headset, so I can talk into the mic and still hear what is going on during my games.
Total ~$1,170 w/8800gts (g92) or $1340 w/3870x2. Depending on how you want to build it, I'd go with at least the $1,170 build, but that would be up to you.