$500 is very cheap for a desktop PC that can play high-end games very well. I'm not entirely sure it's possible with quality hardware. In this case, I suggest getting a powerful core (CPU, motherboard, PSU) and getting lower end, easily swappable other parts. Once you get more cash, you can add or replace them. If you're going for AMD's AM3 platform, you are largely limited to ATI cards unless you don't care about SLI/Crossfire. There is, for now, a single NVidia chipset motherboard for the AM3 line. I also suggest avoiding XP since Windows 7 will be out in a couple of months. If you can, wait till then. Windows XP has left mainstream support and is in the extended support phase, and will leave support entirely in 2014.
Case: Your case may or may not be good, but on a $500 budget you really have no choice other than to use it.
Motherboard: ASRock M3A780GXH/128M AM3 AMD 780G HDMI ATX AMD Motherboard
- This will handle AMD's new AM3 CPU's. This motherboard also uses DDR3 and allows for Crossfire. $89
Video Card: POWERCOLOR AX4870 1GBD5 Radeon HD 4870 1GB
- Since the motherboard will Crossfire, this would be a good card. If you really want to use NVidia, spend more, and not be able to Crossfire the cards, you can get the XFX GX260NADFF GeForce GTX 260 Core 216 896MB
which has similar performance to the HD 4870. $144 (Before $20 mail-in rebate)
Power Supply: CORSAIR CMPSU-650TX 650W
- This PSU will handle everything in the PC and will allow for a Crossfire setup. $99 (Before $10 mail-in rebate)
CPU: AMD Phenom II X4 955 Black Edition Deneb 3.2GHz
- CPU's take more time, in my opinion to swap out and replace. That's why I suggest getting a good one like this. If you don't want to spend this much on a CPU, there is another option, the AMD Phenom II X3 720 2.8GHz
RAM: Crucial 4GB (2 x 2GB) 240-Pin DDR3 SDRAM DDR3 1066
- The motherboard requires DDR3 and this will work. $72
Hard Drive: Western Digital Caviar Green WD5000AADS 500GB
- When you said disk drive, I'm not sure if you meant this or an optical drive. $54
Optical Drive: You can probably use the one in your old PC.
Operating System: Don't use XP since you'll need a 64-bit OS to use all 4GB of RAM. You have some options here. You can wait for Windows 7 to be released or you can go ahead and buy Vista with an upgrade coupon. I suggest holding off until late October when Windows 7 is going to be released as that will give you more money to spend on the setup. If you want this PC now, you can get Vista here
. Note that you cannot reuse Windows XP from on old machine if it is OEM. OEM copies are paired to a particular motherboard, retail, boxed copies do not have this restriction as you can move them from one PC to another.
Price: $654 (Before rebates, with the Phenom II X4, HD 4870, and without an OS)