This the absolutely cheapest I'd build a system today. Remove anything you don't need, like the case and optical drive if you can re-use them. Sometimes a combo will turn up, or a Shellshocker, or other good deal; check on the day you buy.
Western Digital Caviar Blue WD5000AAKS 500GB 7200 RPM SATA 3.0Gb/s 3.5" Internal Hard Drive -Bare Drive
Model #:WD5000AAKS
Item #:N82E16822136073
$49.99 -$6.00 Instant $43.99
There are faster, but on a budget this should be a reliable drive, and big enough.
Microsoft Windows 7 Home Premium SP1 64-bit - OEM
Model #:GFC-02050
Item #:N82E16832116986
$99.99 -$10.00 Instant $89.99
Not much choice here.
Xigmatek ASGARD II B/B CPC-T45UC-U01 Black / Black 0.8 mm SECC / Aluminum and Aluminum Mesh Bezel ATX Mid Tower Computer ...
Model #:CPC-T45UC-U01
Item #:N82E16811815004
$39.99 -$10.00 Instant $29.99
Rosewill also has some decent cheap cases. Sometimes there will be a special, so you may lower this another $5-$10.
ASRock 880GM-LE AM3 AMD 880G Micro ATX AMD Motherboard
Model #:880GM-LE
Item #:N82E16813157199
$59.99 -$5.00 Instant $54.99
I've used this board. For a basic build, it should be just fine. If you can spend as little as $10 more, look for an AM3+ mobo if you'd like to upgrade to Bulldozer some day.
SAPPHIRE 100287VGAL Radeon HD 5670 (Redwood) 512MB 128-bit DDR5 PCI Express 2.1 x16 HDCP Ready Video Card
Model #:100287VGAL
Item #:N82E16814102871
$69.99 $69.99
Depending on your resolution, this should be able to play any game, just that you may need to lower some settings. As budget allows, this would be the first item to improve for gaming. A HD5770 is as low as $95 if you play the rebate game and win.
Antec EarthWatts Green EA-380D Green 380W Continuous power ATX12V v2.3 / EPS12V 80 PLUS BRONZE Certified Active PFC Power ...
Model #:EA-380D Green
Item #:N82E16817371033
$59.99 -$20.00 Instant $39.99
This has been my "goto" PSU for basic builds for the last few years. None have failed, been noisy, hot, or had other problems. Will handle a HD5770 without any trouble.
AMD Athlon II X3 450 Rana 3.2GHz Socket AM3 95W Triple-Core Desktop Processor ADX450WFGMBOX
Model #:ADX450WFGMBOX
Item #:N82E16819103886
$79.99 $79.99
You want at least three cores. Four would be nice, but on a tight budget, this should do well enough.
G.SKILL NS 4GB (2 x 2GB) 240-Pin DDR3 SDRAM DDR3 1333 (PC3 10666) Desktop Memory Model F3-10666CL9D-4GBNS
Model #:F3-10666CL9D-4GBNS
Item #:N82E16820231396
$39.99 $39.99
I bought a few G.Skill RAM kits recently, and have not had any problems.
LITE-ON 24X DVD Writer Black SATA Model iHAS424-98 LightScribe Support
Model #:iHAS424-98
Item #:N82E16827106335
$24.99 $24.99
Meh. One optical drive is much like another. This one has Lightscribe.
Subtotal: $473.91
Deals may chop this down a little, but you don't want to buy junk. I can recommend these parts (in fact I have used them) and keep a clear conscience about it.
Good luck.