Here's my suggestion:
Intel Core 2 Duo E6300 1.86GHz - $ 184
Intel 945GZ (ISSL) Micro ATX Motherboard - $ 84
XFX GeForce 8800GTS 640MB PCI-E x16 SLi - $ 490
Kingston ValueRAM 1GB DDR2-533 CL4 - $ 117
WD Caviar SE16 250GB SATA 3.0Gb/s - $ 75
SCEPTRE X9WG-NagaV 19" Widescreen HD LCD - $ 180
POWMAX CP803-3 SGCC ATX Tower 480W PSU - $ 30
Samsung 18x DVD-Burner w/12x DVD-RAM ATA - $ 30
Microsoft Curve 2000 B2L USB Keyboard - $ 14
Microsoft Laser Mouse 6000 B7G USB - $ 25
Creative SBS 380 20w 2.1 Speakers - $ 28
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Total (NewEgg.com) $1257
Alright so that is a little over-budget, the case isn't exactly breath taking, plus only 2.1 Speakers - not to mention the CPU is bottom of the line Intel Core 2 Duo.
Still the performance you will see over the system you posted above, is just going to be amazing. If at a later day you splash out ~$100 for a Water Cooling System, you can over-clock that CPU to 3.0GHz
While this might not seem like much, in games you'll see the performance edge close to E6700 performance. Still it will certainly put most high-end AMD Athlon64 X2 trying to keep up even at stock settings.
Also you might want to swap out the 533MHz ValueRAM for 800MHz HyperX. This will provide you with FAR better performance despite having the exact same. With what I chose you still get a reasonble performance, without the RAM overheating.
The case itself for the price-range isn't bad. 480W PSU (Preston) as well as case cooling and space for more fans if required. Also chose a full metal chassis, but you still might want to upgrade to something better when you have the cash.
The CPU and GPU are probably the most expensive peices of equippment but they will last you for the next 2-3years minimum. Not to mention 100% Vista Compliant card supporting Shader 4.0
Something else you might notice is the 19"
Widescreen HD Monitor. Just in-case you get one of those pesky HD Consoles
Spectre are also a very good reliable budget brand. If you had upto $1500 I could've improved some aspects quite a bit; given you a truely ultimate gaming machine.
Also the motherboard supports Core 2 Duo and Core 2 Quadro processors.. so when the 4-Core processors come down in price, you won't have to worry about slotting it in. No SLi possible on that board, however that honestly shouldn't be a problem.
Intel Core 2 Duo E6400, 512MB DDR2 667MHz, ATi Radeon X1900 XT 256MB PCI-E, Windows Vista Business / XP Professional SP2