Does this system look acceptable as a midrange gaming machine? Could you suggest any replacements that might improve the system whilst sticking within the budget?
I agree that the power supply is junk. The PS that "build" suggested is overkill for your system, you can get by easily with a 450-500 watt PS. Find one in that range from either OCZ, Corsair, or Antec and make sure that it has at least 30Amps on the 12V rail.