I say go with happy mediums for both. That's what I recently did. Tired of waiting for the next big thing, eager for DX9 to arrive, I went with an Athlon XP1700 on an ECS K7S5A board ($155 online from Accubyte, pricewatch.com) and a retail ATI Radeon8500 for $150.
For current and soon-to-be-released games, IMO, you want a DX8.x compatble card (GF3/4, Radeon8500), and at least a P4 1.6/ XP1500+. You could get away with a slower CPU than that, perhaps a Duron 1.2 or PIII 1.2, but seeing as both the P4 1.6 and XP1500+ are nearly the same prices as their slower relatives, you may as well go with one of the faster chips.
Just my opinion. Spend a little less and you'll be more comfortable upgrading in a year or so. Personally, I prefer upgrading every year (sometimes more often than that) because irregardless of what I buy, even if it's top of the line, I always want somethng faster 6-12 months down the line.
"Put your desk in the corner." - Stephen King