Assembling a PC is the same as parts swapping. Just a few precautions for static, using a guide for the correct order of stuff, and you're good to go. The most difficult part is the motherboard installation, and thats not any more difficult than putting a shelf on the wall. But, the distraction and time commitment concerns are valid and we'll try to get you the most PC for the money out of the box.
Being a box system with a warranty, you'd have to read the language to see if replacing the PSU voids the warranty. Same with adding an aftermarket GPU. If they do, then I'd wait and once the warranty is up, then I'd consider a new PSU and GPU solution. (now that I've added the AMD system, you won't need a GPU at all until you get to trying games on the PC.) I'd still get the extra power for $15, at the very least, it should run more efficiently for the same amount of power being used.
With the ram, the stuff they'll use probably isn't the fastest speed, but it will work at its rated speed. For what you're doing, probably wouldn't notice any significant difference, so I'd just leave what they have in there.
When you do get to its use as a HTPC, you won't need an audio card. The audio built into the mobo will do the job above and beyond your needs. The only users that need audio cards are those doing production recording/editing.
Configuring a PC on TD, here's two options I came up with:
OPTION 1, Best Recommendation
My first choice is actually an AMD system. The CPU is faster, the onboard graphics are much better than the intel option, and it has firewire and HDMI built into the mobo, but it is $25 over budget delivered (midwest). You can also OC this system later (but it would probably void the warranty if you do it when its covered.)
Systemax Windows XP Desktop Computer - AMD Socket AM2+/AM2 Build-to-Order Desktop Computer with the Asus M3A78-EM Motherboard
Item No. BTO 981029
$624.59 delivered
Networking: Integrated Gigabit Network Adapter
Keyboards / Mice / Input: No Keyboard Selected
Keyboards / Mice / Input: No Mouse Selected
Modems: No Modem Selected
Monitors: No Monitor Selected
Software: DOS
Speakers: No Speakers Selected
Hard Drive: No second hard drive selected
Accessories: 1 Year Parts & Labor Warranty
Components: Integrated Firewire
Power Protection: No Power Protection
Removable Data Storage: 9-in-1 Card Reader USB2 Black
Components: Integrated High-Def Audio
Power Supplies: 500 Watt Power Supply
Accessories: No O/S AMD Workstation
Video / Graphics Cards: Integrated ATI HD3200 Graphics
Hard Drive: 1TB 3G SATA II Hard Drive
Accessories: Micro ATX Chassis Base
Motherboards: Asus M3A78-EM Motherboard
Memory: 4GB DDR2 PC6400 800MHz Dual Channel (2GB x 2)
CD/DVD Drives: 22X DVDRW SATA Drive
Accessories: Non-Brand mATX PC Branding Pack
Processors: AMD Phenom II X4 Quad Core 925 2.8GHz Processor
OPTION 2
The main difference between the one you have above and this intel is the mobo. You won't be able OC this, but if you're not planning on it anyway, then no loss. What you do gain is intels latest integrated graphics chip. Its not saying much, but is better than the 3100. For $10, I added the firewire now, not really going to get that cheaper later and it is used to compare to the AMD system that has it built in. I also added a multi-card reader to both builds. I find mine very useful and it was only $8.
DG41RQ No O/S Workstation Item No. BTO 981266
Delivered to Midwest: $576.58
Networking: Integrated Gigabit Network Adapter
Keyboards / Mice / Input: No Keyboard Selected
Keyboards / Mice / Input: No Mouse Selected
Monitors: No Monitor Selected
Software: DOS
Speakers: No Speakers Selected
Hard Drive: No second hard drive selected
Accessories: 1 Year Parts & Labor Warranty
Power Protection: No Power Protection
Removable Data Storage: 9-in-1 Card Reader Black
Components: Integrated High-Def Audio
Components: 1394 Firewire PCI Card
Wireless Networking: No Expansion Card Selected
Power Supplies: 500 Watt Power Supply
Hard Drive: 1TB 3G SATA II Hard Drive
Video / Graphics Cards: Integrated Intel GMA 4500 Graphics
Memory: 4GB DDR2 PC6400 800MHz Dual Channel (2GB x 2)
Accessories: Micro ATX Chassis Base
CD/DVD Drives: 22X DVDRW SATA Drive
Accessories: Non-Brand mATX PC Branding Pack
Motherboards: Intel DG41RQ mATX Motherboard
Accessories: DG41RQ No O/S Workstation
Processors: Intel Core 2 Quad Q8300 2.5GHz 4M 1333 Processor
To compare the graphics, look at this chart. The intel 4500 is 4 tiers lower than the integrated HD3200 from the AMD system. The intel GMA 3100 is even 3 tiers lower than the 4500.
http://www.tomshardware.com/reviews/best-graphics-card,2404-7.html
To compare the CPUs, look here:
http://www.anandtech.com/bench/default.aspx?p=81&p2=52
The cpus are close to the options offered. The AMD 920 is virtually the same as the 925 when using DDR2 ram, and the Q8300 is a touch faster than the Q8200, so the lead would be a little less from the AMD over the Q8300.
For better performance and graphics for HTPC, go with the AMD system all the way!!!!!!!!!!!!!!!!!!1
The only other thing to consider is a backup solution. Especially if you have home movies and pics of the kids, get an external HDD, backup your documents and media, and store it off site. Update the backup once a week or as often as needs be to protect that precious data. You'll be glad you did if you ever need it. You could get an external enclosure for $20-30 and use the HDD from the old computer.
EDIT:
For comparison, I picked equal parts on newegg to see what it would cost to build an equal or better system yourself. Getting a 3.0 ghz CPU instead of 2.8ghz, a better mobo with the HD4200 integrated graphics (better HD support,) and DDR3 ram (better upgradability if you ever needed more, doubt that you would), came to about $497 delivered after $20 mir.
To build the exact same system (except the CPU, newegg doesn't offer the 925, so I'm forced to upgrade to the 945) after mir delivered is $477.
So if it's worth $150 for your time and lack of warranty, you can build the AMD system yourself. Or get a little better mobo and ram and still save $130.