Hey man!
I have very similar.
I upgraded to a decent multipurpose rig for...
(wait for it)
£200.
That can't be more than $400, right?
-Athlon II X3 435: £55
-2GB DDR3 RAM stick: £30
ASUS M4A785TD-M EVO M/Board: £70
(Fitted in my micro ATX case, and has 4 mem slots, as well DDR3 and Windows 7 "support"; they do the -V for normal ATX)
-ATI 4650 GPU: £35
-450W power supply: £15
I don't do much gaming, mostly music production and then my family surf the net with crazy amounts of windows/tabs open, and msn too, multi users logged onto the PC at once, etc. So went with more cores as opposed to higher clock speed.
To make it more appropriate for you, I'd suggest a better graphics card, and perhaps another stick of RAM for 4GB, and dual channel.
2 cores will get you by too.
-Graphics cards:
ATI
4670 = £50
4850 = £80
Geforce GT 250 = £70
8600GT = £30 (ginger6.com)
8600GTS = £40 ebay, or higher
8800GT = £90
8800GTS = £95
9600GT = £40
9600GSO = £40
Let's call it £80 for your new card.
All prices included delivery as far as I can remember (was at start of this month)
It sounds like you also need:
-harddrive: SATA 250GB from £20
-DVD burner: £20
-Windows: £120 or so on upgrade or OEM version when purchased with Hardware
-Case: from £25
You might get a deal where case and PSU together cost £20-£30
Tot it up:
CPU: £55
RAM: £60
M/board: £70
GFX: £80
Case + CPU: £50
HDD: £20
DVD: £20
OS: £120
£475 according to my mental maths.
Approx $750?
I'd suggest finding an old copy of windows you can legally use (got an old pc around somewhere?) and roll back to XP. Save you £120 (or more! Dunno how much windows is in the states)
Perhaps just 1 stick for ram, save you £30
Go for a dual core X2 Athlon II: save you £15-20
Go for AM2+ motherboard and DDR2: save you £30-40
That could take the rig down to a splendid £280 which is within budget, EASY $450 or so, right?
Just my own experiences and my own research over here in the UK, maybe more experienced guys and guys more local can help out more!
Merry Christmas/season's greets, all