The sub-$150 processor arena is shared between the Celeron D (Intel's current offering), and the Socket 754 Sempron (AMD's current offering). The Celeron D line is priced a few dollars above the Socket 754 Sempron line, and while the Celerons have the clear upper hand in a couple of tasks (mainly MPEG-2 encoding), the Socket 754 Semprons are roughly as fast or faster in everything else.
Since I doubt anyone is going to buy a budget computer to do video encoding non-stop, I'm going to be focusing on the Semprons in this article.
Performance and price increase pretty much linearly with value processors, so just pick based on your budget. Here are the current 64-bit Socket 754 Sempron offerings - these are all 64-bit enabled and use the 90nm Palermo core:
Note that there's now an Athlon 64 3000+ Venice for Socket 754 which retails for around $120. While it is a great overclocker, it'll actually be slower at stock speed than the Sempron 3400+.
3. The motherboard
nVidia offerings tend to be nicer than VIA/ULI/SiS ones, so I'll be focusing on those. Socket 754 nForce 4 boards are quite cheap nowadays and have PCIe support, so they're a good bet for later upgradability. If you're stuck with an AGP card, look at Socket 754 nForce 3 offerings instead. Here are some nice boards with both chipsets:
Since budget PCIe graphics cards are cheap enough and the decent $100-150 AGP ones are getting harder to find, it's a good idea to jump on the PCIe bandwagon now, unless you have an existing AGP card you'd like to keep.
4. RAM
Socket 754 Semprons take PC3200 DDR SDRAM, although you can always use slower memory if you have some leftover from an old system. This will hurt performance somewhat, but it'll work.
As for which sticks to buy, just go with Value RAM from a big name brand, such as Corsair, Kingston, Crucial or Mushkin. Don't go with generic RAM, since larger manufacturers offer lifetime warranties as well as pretty stringent quality control.
A single 512MB PC3200 stick should run you around $45 as of September 2005.
5. Graphics cards
With a budget system, just buy the best graphics card you can afford. The following cards should offer the best performance possible at each price point (they're all PCI-Express):
eVGA 6200 Turbocache - $59 (The ASUS K8N-VM has onboard graphics pretty similar to this, so don't buy both)
Sapphire X800GT 128MB - $99
eVGA 6600GT PCIe - $129
(Prices taken from newegg.com)
The X800GT is really the bare minimum you'd want for any kind of serious 3D gaming. The 6200 is a decent entry-level card that'll run older games fine.
Don't succumb to the temptation of getting a suspiciously cheap 256MB card or something with a large model number ending in "SE". More than 128MB of video memory only makes a significant difference with $250+ cards, and "SE" or "LE"-branded cards (or other similar derivatives of popular cards) are usually crippled beyond recognition.
As for which card manufacturer to pick, Sapphire and eVGA are good choices since they make the reference cards for ATI and nVidia respectively. Most manufacturers are roughly the same, though, so just check a few reviews before making your purchase and you should be fine no matter which one you go with.
6. Sound cards
Most people will be happy with onboard sound these days, but if you have expensive speakers/headphones then onboard just isn't going to cut it. Most good consumer cards use either VIA's Envy24 sound chip or Creative's emu10k2 (basically Audigy 2/Audigy 2 ZS). For standard multimedia use, you should be looking at the following cards:
The Audigy cards will have poorer analog sound quality than the Envy24 ones, but they offer hardware sound acceleration support in most games as well as EAX DSP effects. In contrast, you'll be doing sound processing in software with an Envy24 card. This isn't as big a deal as it sounds, however, since most games today offer software DSP effects that sound just as good as Creative's EAX stuff, and the performance hit from letting the CPU do the work is reasonably small on modern systems. Overall, the M-Audio Revolution 5.1 is probably the most versatile, considering the good multichannel DAC and reduced CPU usage in games compared to other Envy24 cards.
7. CD/DVD drives
If you just need to play DVDs/CDs and burn CDs, get a cheap Lite-On combo drive like the SOHC-5236K. If you want a DVD burner, get a NEC ND-3550A.
8. Hard drives
There's no real way to assess failure rate for consumer hard drives, so you should be picking something based on four factors: cost, warranty, performance, and noise output. The following drive lines come standard with 5-year warranties:
Seagate Barracuda 7200.*
Maxtor MaxLine
Western Digital Caviar RAID Edition & Raptor
And these have 3-year warranties:
Samsung Spinpoint P80 & P120
Western Digital Special Edition (SE)
Maxtor Diamondmax
Hitachi Deskstar SATA
Pretty much anything else will only have a 1-year warranty, so you'll be better off with the listed drives. For performance, in decreasing order from fastest to slowest, you can usually expect: Raptor, MaxLine, Caviar RE, P80/P120, 7200.7/.8. For noise output, in increasing order from quietest to loudest: P80/P120, MaxLine, 7200.7/.8, Caviar RE, Raptor.
Note that you're going to want to enable AAM if you really want a quiet drive, since even Samsung's offerings - silentpcreview.com's reference - are quite loud with it turned off. AAM can be enabled via Hitachi's Feature Tool, although not on Seagate drives since they don't actually support AAM.
Also note that the Raptor is more of a high-end workstation type drive because of its high spindle speed (10,000RPM), so it doesn't really fit in with the 7200RPM drives.
Lastly, you should know about SATA. Like, PCIe, SATA is a new high-speed serial interconnect set to replace an old parallel one (in this case IDE/PATA). It offers longer, narrower and more flexible cables, as well as a new power connector design that allows compatible drives to be hot-swapped. It is preferable to get new drives in this format, as IDE will eventually be phased out, but installing Windows on a SATA drive may require a floppy disk with the SATA controller drivers.
That's pretty much all there is to it. Make backups often, don't do something dumb like run a 600GB RAID0, and your data will be safe.
You'll probably want to cut down expenses by getting a case/PSU bundle, however. This pretty much restricts you to Antec if you want a decent PSU, since most other case manufacturers bundle low quality PSUs with their cases in order to cut costs.
The procedure listed is for old Socket A Athlon systems, but it's fairly similar with current hardware. Building a PC from scratch is really pretty straightforward: just take it slow, do some reading beforehand, and you'll be very unlikely to screw up. Even if that happens, most decent on-line stores and manufacturers offer good warranties, so you definitely have a safety net if you get a bad part or break something.
12. Changes
2006-02-11 - Redid CPU, motherboard, graphics and HDD sections.
2006-02-03 - Replaced x800gt with 6600gt.
2005-11-18 - Added bit about S939 3000+ price drop in CPU section.
2005-09-29 - Major update. Recommend PCIe in motherboard/graphics section, since budget PCIe hardware is cheap enough now, and added 64-bit Sempron and NEC 3540A. Removed sample systems.
2005-08-03 - Updated CPU prices.