Better overall system, with 4GB DDR3, a triple-core Deneb black edition processor, and an HD4890. The PH2 720 will perform better than the Core 2 in games, and much better in multithreaded applications. The HD4890 is better than the GTX260. If you want to spend more of your budget, you could upgrade to a Phenom II 955, an HD4850X2, or Crossfire 4870s.
$60 more than HD4890 build, more expensive motherboard of similar quality, more expensive graphicas card of superior quality.
------------------------------Phenom II X2 unlocked to four cores @ 3.8gHz,1.45V. 4GB DDR3-1600 Gigabyte 785g ATi Radeon HD4870 1GB
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Smithereen has a good build there. I've gone in a slightly different direction, building a solid platform to expand on.
AMD X4 940 This has a nice price, but it's not a DDR3 compatible CPU, sadly. It's a step up in speed from the X3 720 though.
ASUS M4A78-E AM2+/AM3 AMD 790GX Good crossfire board. Will probably be in combo with this CPU shortly. Newegg has the wrong board listed at the moment, and I alerted them.
G.SKILL 4GB (2 x 2GB) 240-Pin DDR2 SDRAM DDR2 1066 You want 1066, lowish price, CAS 5, and lowish voltage. Oh, and a low profile. No raised RAM heatsinks on AMD boards as the RAM is close to the CPU and cooler.
Scythe Shuriken CPU cooler This top-down cooler should fit the board well, and do a decent job. I'm trying to research large coolers with these AMD boards now... there are issues.
Thermal paste
Cooler Master HAF A good case that will last a long time. Excellent cooling and ease of use. Nice features.
You could drop in the 940 into the 980a board, you'd be around $1000. The AM3 equivalent is over $50 more, though.
------------------------------Phenom II X2 unlocked to four cores @ 3.8gHz,1.45V. 4GB DDR3-1600 Gigabyte 785g ATi Radeon HD4870 1GB
Run Folding@Home! Support Toms Hardware Guide, Team 40051!
CPU Buyer's Guide
Reply to smithereen
------------------------------Phenom II X2 unlocked to four cores @ 3.8gHz,1.45V. 4GB DDR3-1600 Gigabyte 785g ATi Radeon HD4870 1GB
Run Folding@Home! Support Toms Hardware Guide, Team 40051!
CPU Buyer's Guide
Reply to smithereen