OK,

I had Umbutu 8.4 (I recommend getting Umbutu, best Linux version I hav used) installed onto my laptop (HP NC6220) which is:

Intel based 1.6Ghz Mobile Processor
1Gb RAM
64Mb intigrated GFX Card (Some intel peice of toilet)

And Linux ran quite happily, except for the vga side as the card is pants. Now with this laptop Windows XP and Vista is unable to plug n play all the drivers for the Hardware on the laptop, but Umbutu did, had all of them and everything worked superb.

Now as Linux is not so heavy on the services and all the other gubbins that Windows (or as it appears macs) have installed, your system will run quite well at low specs.

My current main PC is:

AMD x64 6400+ Black Ediition Processor (3.2Ghz)
4Gb RAM 555Mhz (System Board supports upto 1000Mhz)
256 nVidia Graphics Card

So linux really flies on this (but I dont use it, Im to used to windows and to busy to learn a new OS), the system cost me around £580 ($1160) to build by hand. The most exppensive part of the whole system was the Processor £110 ($220) and then the RAM £77 ($154). Everything else was £50 ($100) or lower. I can give you the whole spec, but I aint got all day to type it out :p.

Anyway I think the most important thing to remember when building your system by hand is to understand where the technology market sits so I recommend:

An x64 AMD Processor 2.8Ghz or above with either dual or quad core
4Gb RAM at 800Mhz or Over
A system board to support your RAM
A nice stable quite PSU
A good nVidia Chipset based System Board
An nVidia Graphics Card 256 or better (try the 8800GTS, that should be dropping in price soon and it will still be a good card in 1 yrs time), you dont need a workstation card (Quatro or simillar), get a GForce.
A nice chuck of HDD Space (I use 1Tb split into 1/2 Tb internal and 1/2Tb external), with the Internal drive partitioned out into 4 sections for better data management.
A get a good, cheap aftermarket fan for the processor, you wont regret that move.

And always remember you are building an investment that WILL need to be upgradable for the advances in technnology.

The system I describe above is quite close to mine and should cost roughly the same. Always remember our buget and always always always shop around. Oh and stay away from bunle deals for the processor and board. you might find one of them isnt quite up tp spec or will be a cheaper cutdown version of the processor.

Hope this helps.