I built a PC in 2001. It was mid-high end at the time.
In 2008, it was time to replace it as it was seriously old. (I had only replaced my PSU and a GPU in that time) I then built the one described in my profile.
In 2010, my 2001 was having serious issues, it had been running a copy of win7home but was chugging along and started to have issues. At this time I was no longer able to find drivers for the nvidia video codec on the mobo, so I figured its been long enough; time to replace it. Keep in mind this is my downstairs PC that for guests, kids, and such. No real gaming beyond kids internet stuff like Club Penguin, etc.
I spent about $180 on a mobo with a AMD Sempron 140 processor running at 2.7G, 2GB of Ram, and a 250GB HDD. It also has on-board Nvidia Gforce 7025 video. I used my existing case, DVD drive, PSU, and everything else.
It runs Win7 pro 64bit, office, and any other basic item. Even plays DVDs without a hitch. (I'm sure if I wanted to put a bluray player on it, it would do just fine as Ihave watched plenty of 720p/1080p video on it)
Whenever a family member or friend asks me what to buy, I suggest taking their current box and simply spending about $200 or less to build a lower-end PC like this. It will easily last 4-5 years without fail and run smooth as butter based on their needs.
There's no reason to do more unless you are a business, developer, or serious gamer (beyond onlive or basic net games).