CPU: The processor will handle the physics calculation (uses a lot of cpu usage)
GPU: The gpu will handle the physics calculation (frame rate might drop a little bit)
Auto: Let nvidia decide whether the gpu or cpu handles it
I choose Auto.
You can go with a GTX 970. It can run 1080p with max settings.
For HDD, anything SATA3, 7200rpm and 64MB cache will be fine.
I personally use 1TB WD Blue.