Budget gaming PC (sub $500)

Hey all, I've been browsing the forums for a while trying to figure out my next build and figured I would just ask you all for advice. I'm looking to build a decent gaming/photo editing PC. I wanted to spend around 400 dollars but would go up to 500/600 if it will make the difference for upgrading over the next few years. I use a laptop mainly and want to have a more powerful computer for using when I'm at home. I dual boot Ubuntu and XP and really only use XP for gaming. I already have an acer 22" lcd monitor that I will be using for the PC and to play an xbox 360 on. So the PC games I'd play are mainly non intensive. What I had for my build so far was an AMD Athlon 64 X2 5600+ but after reading the general guide for parts, I started thinking about intel more and more. The GPU I was looking at was the SAPPHIRE Radeon HD 4650 as it ran about $60. But I am open to new ideas as I have no idea how outdated my original build is today, I feel like every month I have to revisit what I think is top line. Thanks in advance for all the help.
-Martin

P.S. this is a ground up build, so all I have is the monitor and keyboard and mouse. Everything else (that i can think of) is needed.

Thanks for the suggestions guys, I've been using that parts list to explore some more on newegg. I just have a quick question about overclocking the build. What would the CPU run at after overclocking? I never figured this into what I've been thinking about because it bumps up the power of what I put into it.

I think for a budget of 600 for gaming, you have to go with a the E5200 and OC. The E5200 can reach some very high speeds from oc'ing due to its high multiplier and will outperform the 7750 BE. Here is how I would do it:

Corsair 400cx $50 with this promo code: EMCLRLN23 and $30 after $20 MIR

Windows Vista 64 bit $80 with this promo code: EMCLRLN28

Rosewill R5730-P BK Case with free shipping and good cooling, also quite roomy. Great deal for the price. $45

E5200 and GA-EP43-UD3L $145

WD6400AAKS $60

LG DVD Combo Drive $25

Mushkin 4gb DDR2-800 $45, $35 after $10 MIR

Xigmatek S1283v DK $40 (I think this will fit...but you will have to remove the side vent tube on the case above the CPU.)

MX-2 Thermal Grease $7

Edit: I forgot to add in the case, oops. So it leaves you about $100 for the GPU, so this one:
Saphire 4830 512mb $90, $75 after MIR.

Outlander, I bow down at your build suggesting prowess.

mpow, you should not go for the 4650 if you want to game, especially when the 4670 is ALSO $60
http://www.newegg.com/Product/Prod [...] 6814102820

That should be your bare minimum card and this should be your choice if you want your build to be half respectable.

Sapphire 4830 $75
http://www.newegg.com/Product/Prod [...] 6814102822

E5200 $70
http://www.newegg.com/Product/Prod [...] 6819116072

Foxxconn g31 Mobo $40
http://www.newegg.com/Product/Prod [...] 6813186145

2 Gigs Corsair DDR2 800mhz $30
http://www.newegg.com/Product/Prod [...] 6820145034