Willing to go below $500 if I can find a laptop to play 1080p minimum. Also lighter would be better of course.
You won't have trouble playing 1080p video in any current laptop- it will just get downscaled to 720p to fit on the 1366x768 LCDs that are in your budget range.
@ $467 HP Pavilion DM1 11.6" ultra-portable laptop
AMD Fusion Dual-Core E-350 (Zacate)
1.6Ghz APU, 4 GB, 640GB HDD, 11.6" 1366x768 LCD w/ Radeon HD 6310 graphics.
3.4lbs and 5.5hrs battery life.
That E-350 is a fairly week APU - but it's enough for the basic home office, education and home entertainment usages. For light duty multi-tasking email, webbrower and iTunes type of stuff it's OK. If you plan to do some heavy multi-tasking - it's not going be the best choice.
Also, the price is higher than it should be. We frequently see the HP DM1 on sale down here in the US for under $400
or $370 0 best deal ATM