For gaming you should consider your components in this order
Graphics card
Processor
Ram
Motherboard
soundcard
The graphics card will make is the single biggest difference to your gaming performance and so where you will need to invest the most money. It’s not just about the amount of ram on the graphics card – it’s the whole architecture and the type of ram. For example the Dell 1525 and Dell 1530 both use the same graphics card – the 8600GT but one has ddr2 ram and the other has DDR3 ram and there is a 20–30% difference in gaming performance. Graphics cards now have up to DDR5 but only the very top end. Aim for a mid-top end card to get the most bang for your buck. A good card now is the 9800GTX or the 8800 GT which you can pick up for about £150 / £90 respectively (and maybe less if you shop around).
Next will be the processor, the one you described won’t set the world on fire but should be capable of playing most games well when backed by a decent graphics card. With Core 2 extreme and quad core becoming very affordable might want to conider those too. Also check not just the speed but also the cache. A good amount of L2 cache makes a big difference – aim for at least 512kb.
Next the ram. You will want at least 2gb and maybe 4gb. Whichever you choose get them in 2 seperate identical sticks so you can take advantage of dual channel memory. Again the speed of the ram is important – the faster the better. DDR2 is on the way out so you have to decide whether to get a cheap/bargain on DDR2 or go cutting edge with faster ram. I’d recommend 2×2GB ram from crucial or if you want to really fly by some corsair gaming ram.
Motherboard. Once you’ve chosen your Graphics, processor and ram it should really narrow down your choice of motherboard. It will need to support all the other components. Buy from a good brand like Asus or Gigabyte. Avoid cowboys like AsRock. MSi is a bit hit and miss.
Soundcard I am not really that fussed about and even the onboard sound from good motherboards is not bad. However, you can’t go wrong with a good creative labs card.
Hard drive – if you have lots of cash get a solid state drive – unbeatable performance but not much capacity for your money. Otherwise get a SATAII drive with 7200rpm or better.
You should be able to build a decent rig with what I described for under £600.