To make your budget you will probably have to set some priorities but you can purchase quite a lot for $1200. I was on a tighter budget than you, about $500, but I did, however, have parts I could re-use.
I don't have much more experience building computers from scratch than you so I'll just tell you what I built. You will probably want to work up from that as a starting point.
I bought an Abit KT7 motherboard, an overclocked Duron, and a Monster II heatsink/fan as a package deal. It cost $218 from OCZ.SAFESHOPPER.COM. From the same place I bought 128 MB of OCZ Select PC-133 memory guaranteed to run CAS2 at 133 Mhz and CAS3 at 150Mhz for $75 (now $69. See www.madonion.com for a review of the memory and the Monster II HSF).
For a case I originally started searching Ebay but after losing a bid someone directed me to www.nimbuspc.com. I settled on the ATX-803K, midtower, w/ 300W power supply, 4 5-1/4" bays (exposed), 2 3-1/2" bays (exposed) and 2 hidden 3-1/2" bays w/ provision for a 4th device (via metal ears) . That's room for 9 devices in total. (I would not recommend filling the case if you are overclocking because of heat considerations). The case is lightweight but very well made and has vented removable sides. It only cost $42, with the 300 Watt power supply + $17.38 shipping. The power supply is limited on the number of device, power connectors, 4 standard and 1 mini, I think. I had a few Y-cables so it wasn't a problem but it would be frustrating if I didn't. I would recommend getting two optional 80 MM case fans for $4.25 each and picking up some y-connectors. Even buying all the extras I mentioned, total cost would be about $75.
Most of my drives were salvaged from my old computer including a Teac Dual floppy (3-1/2" and 5-1/4"), a Toshiba 24X CD-ROM and a 4X/2X/20X HP CD-RW. I had to spring for a new hard drive deciding to go for capacity not speed. I bought a Maxtor 40 GB, ATA/100 (I know the KT7 only supports ATA/66), 5200 RPM that only cost $99 from CompUSA (with rebate).
Other re-used parts included keyboard, mouse, game controllers, Geforce256 SDR and a 16-bit, Turtle Beach TBS-2000 sound card.
I would have liked to replace the sound card but it would have put me over my $500 budget. My actual total cost was about $475 (including an unexpected AT-PS/2 keyboard adapter).
Using my system as a model you would have about $700 to spend on floppy drive, CD-ROM or DVD, CD-RW drive, video card, keyboard, and mouse. You can do quite well n $700 but I don't think you can buy the best of everything.
If you don't want to overclock you should probably spend $150 more and get a 1000 Mhz Athlon Thunderbird processor leaving only $550-$600 to spend on the rest. This is going to limit your choices. You will probably have to eliminate something. A 48X CD-ROM will be about $30-$40, A Geforce 2 GTS video card, probably $220, a hard drive $100-$150 (depending on speed and capacity), A Soundblaster live about $45-$70, keyboard $50, CD-RW $150-$350, mouse $50. If you don't need a CD-RW you can probably make your $1200 budget, might even be able to upgrade the video choice to a Geforce 2 Pro. If you need both a DVD and a CD-RW you will probably break your budget by $300+. You could save a little money, maybe $50), by going with an ATI Radeon w/ 32MB DDR memory.
I hope this gives you some ideas. By the way my Duron is a 600 Mhz version overclocked to 900 Mhz, (sometimes 1000 Mhz).
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