I would recommend an Intel Core 2 Duo E6600. This CPU has the best price vs. performance. It was the two time customer's choice award at newegg.com, probably the best site to buy computer parts online:
Also, if you overclock, it's an amazing overclocker.
Some additional advice - don't buy a really expensive video card yet, wait for the prices of the DirectX 10 video cards to drop.
Other than that, make sure you get some quality RAM (like Corsair, OCZ, Kingston, etc.). For that budget, I'd recommend about 2 GB of DDR2-800 or DDR2-667.
For the power supply, get a good name brand (Antec, OCZ, etc) and get probably at least a 500 watt one, preferably 600 watts.