Asrock z77 Extreme4
120GB OCZ SSD, if you can afford it go with the 256GB model since your going to be doing alot more than playing games.
At least 2 TB of storage space
32GB? Maybe 16GB if your running linux of GSkill Ripjaw x 1600
Graphics card for D3/WoW and dual monitors can be a 550ti or a radeon 6850
OCZ 600w modular PSU
Case is really up to you, as long as its full. There are alot of good ones out there.
Hyper 212 evo to help cool the CPU, the i7 runs hotter than other intel chips.
pop in a samsung 830 128gb SSD if you need the extra speed
You dont need a $250 GPU for wow or d3. The 6850 should be more than enough. I know for a fact the 550ti runs both with ultra settings and two monitors.
The 400w PSU is not going to be enough, need to with at least a 550w, 600w I believe would be ideal.
In dealing with virtual machines, I know running 1 VM off a 500GB HD is challenging. If you are dealing heavily with them you might want to consider more just for the simple fact that once they expand there HDD space, you cannot shrink it unless you destroy the VM.
The thing is he wants 'budget' thats why the 6850 card would probably be best for him. I have both games on ultra w/ multiple monitors and I am using a 550ti, about $150 less than the 7850. Since he is dealing with VM machines your also going to need more than 1 hdd because your gonna want a raid config. It is bad enough having a HD die on a computer, imagine loosing your HD for multiple computers. I know the 1TB drives are pretty stable now, but I think the 3TB drives are still on the edge. I remember when 1TB drives first came out and they were failing left and right because the discs would mis-align. I would also definately get Western Digital drives, they are a bit more expensive but come with a 5yr warranty, compared to Seagates 1yr.
Sometimes, the 560 Ti drops down to $150. I saw it happen a month or so ago, but it hasn't repeated. One time, the 550 Ti 448 dropped to $155, which is an absolute steal. Wish they dropped to those prices again!