$700 machine? No problem.. does that includue a monitor though?
If not.. you'll need the cpu, mobo, ram, video card, hard drive, dvd drive, case, power supply at a minimum. Get a cheap mouse/keyboard for now or re-use your current one. Reuse your current operating system & monitor too.
Now, there are a few directions you can take.. are you interested in overclocking much? Or SLI/Crossfire eventually? Or just low cost gaming with a current system?
With your low-cost needs, I'd go with something like this:
CPU: Intel E6300 $182
Mobo: Asus P5NSLI $107
RAM: 2x512MB Corsair ValueSelect DDR2-667 $107
Video: eVGA 7600GT $120
HD: Western Digital SE16 250GB (WD2500KS) $80
DVD: Lite-On 18x DVDR $30
Case/PSU: Antec Solution w/350W PSU $60
Total: $686
For $130, the Gigabyte GA-965P-DS3 would be a better motherboard option if you'd rather overclock your E6300 instead of having future SLI capability.
For $125, 2x512MB CorsairXMS2 DDR2-800 memory would be better for overclocking..
For $40, a Scythe Ninja CPU heatsink will be cooler and quieter than stock, with better overclocks available..
For $90, the SeaSonic S12-430 power supply is a great upgrade - www.silentpcreview.com
All items/prices are at www.newegg.com - usually best to shop at one place to save shipping costs..
It's much better to buy a few great components, then upgrade the others as you go, than to buy all new (but lower quality/performance) components. If reusing your current computer's components is an option,
consider this:
CPU: Intel E6300 $182
Heatsink: Scythe Ninja (120mm fan included) $40
Mobo: Gigabyte GA-965P-DS3 $130
RAM: 2x512MB CorsairXMS2 DDR2-800 $125
Video: eVGA 7600GT $120
Power Supply: SeaSonic S12-430W $90
$687
Reuse your current hard drive, case, monitor, keyboard, mouse.. those are easy to upgrade later. Don't underestimate the importance of a quality power supply, especially when overclocking. With the Scythe heatsink, SeaSonic power supply, Corsair DDR2-800 RAM, and Gigabyte motherboard, that E6300 should be able to overclock to E6700 speeds (2.67GHz) without too much trouble. Although a high performance case (Antec P180) would really help keep temperatures down. The following items have instant rebates now, so they're great deals: Scythe Ninja, Gigabyte mobo, Corsair RAM, SeaSonic PSU. There's also a $20 mail-in rebate on the video card.
Now, you've got some solid & high-speed components for now.. with a few items you could upgrade in the future:
Western Digital SE16 250GB hard drive $80
Antec P180 Case $120
Another 2x512mb RAM $125
Geforce 8 series GS GPU when they come out next year.. $200-300.
Now, some are going to say to go with the Pentium D 805 for only $92. You're not getting a Geforce 8 series video card in combination with this anyway, so why not at least have one component of the CPU/GPU be near the best available? A $182 E6300 can easily overclock to E6700/X6800 speed with relatively inexpensive supporting components, so get the 7600GS/GT video card now, and upgrade to the 8600GS (or other 8-series mid-range card) when it comes out next year..
It doesn't make sense to me to spend more money now on a DX9 videocard when a few months from now you can have a higher performing DX10 card for $200. A 7600GS/GT is enough for now, especially if you don't have the high resolution monitor to require something better.