You're keeping one of the more expensive components: the video card. That will save you cash, as will reusing optical drives. You can reuse hard drives, but I suggest doing so only if they are SATA since PATA (IDE) is slow. Also, hard drives tend to fail after about five years, so if your drives are old, it may be in your best interest to simply buy a new drive. Anyway, here's a list.
Case: Here is where you can be a little choosy. A mid ATX tower will easily accommodate your current graphics card. But if you see yourself getting one of the high-end models later on, a full ATX case would be advised. A good mid ATX case is the
COOLER MASTER Centurion 5 CAC-T05-UW. If you want a large full ATX tower, the
Sunbeam Transformer IC-TR-US-BA-WOPSU could work.
Power Supply:
OCZ ModXStream Pro OCZ600MXSP 600W - This will handle most single GPU setups and even some multi card ones. $70 (Before $20 mail in rebate)
Motherboard:
ASRock M3A785GXH/128M AM3 AMD 785G - This will handle the new AM3 processors. It also allows for Crossfire and DDR3. There are very few SLI-capable boards for the AM3, and those that exist use older chipsets. If you want to use more than one graphics card, you will need an ATI one, but given your current graphics card, you shouldn't be using SLI with it anyway as it is not super powerful. This motherboard can use up to two PATA (IDE) devices. So if both your hard drive and optical drive are PATA (IDE), then you've used all available ports. $99
RAM:
Crucial 4GB (2 x 2GB) 240-Pin DDR3 SDRAM DDR3 1333 - The motherboard uses DDR3 memory and this is it. Note that you will need a 64-bit operating system to use 4GB or more of it. $65
CPU: Here's where prices vary widely based on how you use your computer. The bulk of your budget will go here. The
AMD Phenom II X4 955 Black Edition Deneb 3.2GHz is the best processor you can get with this motherboard. The 955 is a quad core that is unlocked for easy overclocking. If you get this processor, you will still be under your budget by about $25. There are less expensive models available. If you want to save money and get a weaker processor, the
AMD Phenom II X3 720 2.8GHz or the
AMD Phenom II X2 550 Black Edition Callisto 3.1GHz are alternatives. $102 to 189 depending on the processor.
Operating System: You cannot reuse the Windows disc from an OEM build. In other words, you cannot use the Windows disc that came with your old HP PC. You have to get a new one. You can wait for Windows 7 to come out in October, or you can buy Vista now and get a free upgrade coupon for $100. You may be able to find an RC of Windows 7, if so, you can get a key for it and use the OS for free until March. If you go this route, Microsoft is giving out keys until Oct 21.