Ok I finally worked through everything and decided on the components for my new system.
 
Use:  Gaming,  mostly MMORPG but occasional RTS or FPS
 
Case: APEVIA X-JUPITER G......................................130.00
PSU: CORSAIR CMPSU-650 TX...................................90.00
CPU: INTEL CORE2DUO WOLFDALE 3.0 E8400........200.00
MEM: G.SKILL 4GB (2X2GB) DDR2 1000 (PC28000)...90.00
Mobo: GIGABYTE GA-P35-DS3L..................................90.00
GPU: EVGA GeFORCE 8800GT..................................160.00
HD:  SEAGATE BARRACUDA 7200.11 500GB.............100.00
 
                                                             Subtotal......860.00
 
My goal was to stay right around 1000.00
 
So the last piece I need and the piece I need help with is the
Operating System.
Windows XP Home ?  32 bit but already proven stable
Windows XP Pro ?  64 bit but I know nothing about it
Windows Vista Home Premium ?  32 or 64 version ?
 
Which would all around run the best with the fewest compatibility issues and would optimize the performance of my setup ?
 
Also I have heard that Overclocking is now super easy and any Noob like me can learn to do it without nuking my system.  So if I choose to go that route,  will one OS be better suited for it ?
 
Thanks in advance,  really want to make this final decision so I can pull the trigger and buy all the parts.

Consider x38 motherboard if you want high overclocking for your cpu. Keep in mind all 1000mhz ddr2 ram are factory overclocked 800mhz sticks, and may default back to 800 if you don't manually set it higher in bios.

Everything good as is. If you don't already have a copy of Windows to run on it, and need to buy a new one, get Vista 64bit. There are no compatibility issue for application level programs, which is basically everything. Driver support should be good by now. I use 64bit Vista, runs like clockwork.

depends what res. if u're gonna go above 1400x1050 then you need two of those 8800GT's and that board isn't an SLI one. get vista 32-bit. 64-bit doesn't support as many apps etc. b/c the devs don't even bother.

Just to clear things up, 64bit os will run 32bit programs. It'll just install to the "Programs (x86)" folder instead of "Programs" folder, and run in 32bit mode, thus not taking advantage of 64bit capacities.

^Agreed. But OP needs to be careful that he has drivers for things like printer, camera (lol that's why I have a card reader),etc for x64. I would personally recommend XP x64 if doing video editing, CAD,etc.

@OP: There are compatibility issues with RAM natively higher than DDR2 800 on P35-DS3x and DS4 boards. Be careful. I recommend you get some good DDR2 800 and OC it or run at 1:1 or smiler. Get some Ballastix if OCing really hard. Those Ballastix can run at ~1150Mhz with loose timing.

Also checkout: GUIDE: Overclocking On P35-DS3L v1.1

I would spend the extra $10 and use a PC Power & Cooling 610 (constent rated).
Also for about $40 more you can get a 8800GTS 512.

^Agreed.