Need Advice for Budget NAS/Media Server

I want to build a system that can double as a NAS and media server. I am hoping to keep the cost at no more than $500, preferably cheaper.

I have a cable internet connection in my computer room at the back of the house. I have a Netgear Wireless N router hooked up to the cable modem. This new server would be in the living room (opposite end of the house).

I may use an XBox 360 to access content on the server and play on a TV.

Approx. Purchase Date: Next 1-2 weeks

System Usage (Most to Least Important): Backups from other computers, playing and streaming media (video, music, pictures) from server and web sites such as Hulu and YouTube

Parts not required: Keyboard, mouse, monitor

Preferred web site for parts: newegg.com, but open to others

Country of Origin: U.S.

Additional Comments: I am planning on using Ubuntu as the OS.

I have a couple of external HDs that I can pull from their enclosures to use on the system.

RAID (or the ability to eventually use it) would be nice.

I can connect this new system via a wired or wireless connection (or both), but doing so will require buying additional hardware (i.e. a new modem for a wired connection)

Hopefully someone here can provide me with some advice and a list of parts for their suggestions!