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There was a $500 budget gamer build on Tom's Hardware (April 2008), but in was by no means a PC that plays Crysis on High settings.

It also didn't include networking capabilities, any input devices (mouse/keyboard), or an OS. The video card was only a 384MB 8800GS, but for about the same price today, you could pick up a 9600GT.

http://www.tomshardware.com/reviews/cpu-graphic-game,1810.html

Realistically speaking, $700 would be a more comfortable budget that would actually provide a complete working PC without cannibalizing components or an OS from an older one.

Knocking a $100 of the build due to "re-using" a copy of an OS is not a legal solution assuming you're planning on running more than one PC on the same license, which many do anyway.