UPDATED - May 5, 2010. This system comes in at a very reasonable price, but still has enough grunt for general usage and some medium intensity gaming.

The actual Budget PC system on our test bench. The case we use for our Labs builds is an Antec Skeleton, which is convenient for frequent build changes and upgrades. The actual case recommended for this budget system is listed below.
CORE SYSTEM
CPU: AMD Athlon II X4 630 - $127

Four cores for just over $100! This quad core processor running at 2.8GHz has plenty of power for most usage models this side of HD video editing, and can even do that with some patience. It comes with a cooler, which also saves us spending more on this tight budget build.
Motherboard: MSI 890GXM-G65 - $179

This MSI motherboard may seem a little pricey for such a low cost build, but the beauty in this one is where you can take it, not where it is now. The new 890GX AMD chipset brings a lot to the table in terms of speed and performance, so if you find yourself with more cash later on, upgrading won’t seem like grafting a jet engine onto a mini. It supports all the new AMD processors, including upcoming 6 core models, USB 3.0 and SATA 6G out of the box. That’s as close to future-proof as you get in this industry.
Graphics: AMD Radeon 5670 - $169

You can spend as much, or as little, as you please on a graphics card. Fitting a capable card like the Radeon 5670 into a sub $800 PC shows just how competitive the budget end of the graphics market is. This model offers a good mix of price and performance. With some forward-looking features like DirectX 11 support, it will last a decent length of time for non-hardcore gaming and is a perfect all-rounder card.
Memory: 4GB Kingston ValuRAM 1333MHz - $135

Four gig is the absolute minimum amount of RAM we’d recommend for anything these days. But there’s plenty of opportunity to mix and match this build to bump up the memory capacity. Kingston’s ValuRAM series is not the cheapest RAM but it does offer good value and excellent warranty and support, which is worth the few extra dollars, in our opinion.
HARD DISK 1: Western Digital 640GB Caviar Black - $89
This is a killer price for a big whack of storage. Over 600 gigabytes, and part of the Caviar Black family, this drive has plenty of capacity and good speeds as well. At under $90 you can’t go wrong. There’s not much we could wish for at this price, and this drive would suit even much higher cost systems as well.
OPTICAL: Optical: Samsung SH-S223 - $35
The Samsung SH-S223 is pretty much no frills, but fast enough for everyone. This DVD-RW drive can read and write at 22x. Its SATA connectivity means no messing around with big flat ATA cables, and the drive will even write DVD-RAM and DL discs.
PSU: In the case - $0
Case: Aywun A1-502 - $60

This chassis isn’t the most beautiful about, but it certainly comes in at the right price. Included is an “Eco” 420W power supply of good manufacture, so that saves us quite a few dollars given our tight budget. The case is also roomy enough and with sufficient ventilation for our components, and there’s plenty of space for future storage upgrades, with 5 internal 3.5in bays.
CORE SYSTEM COST - AUD $794
EXTRAS
For consistency in our testing, APC has chosen BenQ as our preferred partner for monitors in Live Builds, since it's the only supplier able to provide us with a monitor for virtually every different type of PC build. We also believe BenQ monitors deliver a great mix of performance and value.
Monitor: BenQ G2420HD 24" LED - $369

This is an excellent 24in widescreen, full HD monitor, with low-power consumption features. Its manufacturing process was also mercury free, and it's certified for
Built into BenQ monitors is the Senseye IPU (Image Processing Unit). Featuring advanced image enhancement technology, it optimizes contrast and sharpness, giving ultimate clarity and depth. Senseye separates color signals and adjusts each one individually, thus avoiding distortion and delivering an all-round richer experience.