Here is a good build for you...
What it does well:
Word Processing, internet browsing, virus scanning, video and photo editing, video viewing, folding@home, and any number of other tomfollery.
What it does reasonably well:
Play older games, as the onboard graphics from ATI are actually capable of running Oblivion, on somewhat reduced settings, at your resolution.
What it does not do well:
Play high-end modern games at resolutions other than 1024x768, with high settings...
BUT, you have upgrade room to fool around with, and should you find yourself in need of more power later, you can drop in quite a few graphics cards without any modifications to my recommended PSU...like the ATI HD 4670, or an nVidia GeForce 9600GSO, which are both good choices at around the $100 canadian mark.