So I set out to build a budget gaming PC that would absolutely trounce my PS360 in capabilities and play almost any game on max with a steady framerate over 40fps. The budget was $550, and all the parts have been ordered, and will arrive late this week or early next week. Here's what I'll be running:

Phenom II X4 3.2 GHz Quad Core
GeForce GTX 550 Ti 
8GB DDR3
Windows 7 64 Bit
1TB HDD (I had an extra lying around, but I'll probably tack on a second internal 1TB HDD later for extra storage)
650w Power Supply (overkill I know, but it should work well regardless)

Parts:
http://www.newegg.com/Product/Product.aspx?Item=N82E16819103921&cm_re=Phenom_II-_-19-103-921-_-Product $100 after coupon
http://www.newegg.com/Product/Product.aspx?Item=N82E16813138283 $55
http://www.newegg.com/Product/Product.aspx?Item=N82E16820226095&cm_re=8GB_DDR3-_-20-226-095-_-Product $62 after coupon
http://www.newegg.com/Product/Product.aspx?Item=N82E16814130625 $142
http://www.newegg.com/Product/Product.aspx?Item=N82E16811147023 $35 during sale
http://www.newegg.com/Product/Product.aspx?Item=N82E16832116986&cm_re=Windows_7_64_OEM-_-32-116-986-_-Product $90 after coupon
http://www.newegg.com/Product/Product.aspx?Item=N82E16817159082&cm_re=650_watt_power_supply-_-17-159-082-_-Product $48 after coupon

Total cost: $532. 
Total Hardware Cost (Cost without Windows): $442.

Edit: I also took a DVD burner out of an old computer.

I think you did very well Nazna. Few things I'd point out or do differently...

Phenom II X4 3.2 GHz Quad Core - Great price and a good CPU. Invest $40 in an aftermrket CPU cooler and overclock this to 3.8 ghz and you're set for 5 years

GeForce GTX 550 Ti  - Its a good card, but you could have founda slightly better card for same money. 1GB GTX460, AMD 6850/5850 tend to hover around this price. 550 is an excellent card now but in 2 years you may have to upgrade.

Biostar mobo -Great price however I personally would have invested in a SLI capable mobo. Dual graphics cards scale really good these days. You would have to spend about 50 bucks more tho for mobo with 16X/8X dual PCIE 2.0 slots...

650w Power Supply - perfect for low/mid range SLI if you ever want to

My only suggestion would be 6850 over 550 Ti but other than that it's a great build.

I can't believe Windows costs 20% of that computer.

I actually thought about doing an SLI mobo, but I decided against it for now. Some day, maybe. It's not a huge deal to upgrade/change my PC in a couple years if I decide to then, and as you pointed out I already have a decent power supply for it. I had to stay in budget after all. 

As for the graphics cards, I based my decision on these benchmarks: http://www.videocardbenchmark.net/high_end_gpus.html

Then searched newegg. The only 460s that are comparable/greater in power are at least $50 more expensive http://www.newegg.com/Product/ProductList.aspx?Submit=ENE&N=100007709600007323 600062521&IsNodeId=1&Tpk=GTX 460

6850s, while closer in price ($30 more) performance difference isn't huge, and I had to stay within budget. Besides, some games only play to their fullest with nVidia cards (Batman AA, for example). Also, the minor improvements these cards would offer for the greater price wouldn't do me much good, since I'm playing on a 720p TV at the moment anyway. At 1360 X 768, that 550 won't have any trouble maxing my games with a good framerate.

Wont you need an Optical Drive to install Windows?   I didnt see one in your build

Oh sorry I should have mentioned. I took a DVD burner out of an old computer. 

Ah,  that would work,  otherwise it would be a very expensive paper weight unil you got one

Oh, guys, I envy you so much everytime I see how cheap you get them.

On topic, you are set for having a blast with that computer!

Old game consoles and old Pc's make great paper weight, I still use my gamecube as a paper weight.

you should actually get more than 60fps on most games if you don't do 8xAA considering that you are using a 720p HDTV. I would have picked up a 6850 anyways because they have MLAA and Edge Detect CSAA which would give you really nice AA at low cost to performance for the quality they are able to provide.