If you insist on building one, I'd go for an integrated mobo so I wouldn't have to worry about sound, network, or video cards. I got a great micro atx mobo using nvidia 6150 chipset. It was the MSI K8NGM2, for socket 939 AMD cpus. That plus a cpu and your old memory, and you'd have a good start for not much money. Add in a cheap dvd burner ($50-$60), a cheap 160 gig HD ($55), and a small/quiet case with at least a 300W power supply. Throw windows XP media center edition on the hard drive, a new keyboard and optical mouse, get a cheapo 17" or 19" DVI LCD (that mobo has a DVI out!) for $250ish, and you are done, except for software.
Add all that up though, and you are right up there with the Dell in terms of price, but with no service or support. With the dell, you can probably find a core 2 duo cpu and get DDR2 memory which means you're slightly more likely to be able to upgrade it in a year or two when you realize you absolutely have to install windows vista for one reason or another.