Hello PoD,
The specs recommended for SSE will be good enough to play most games. As for the graphics card I would suggest a Radeon HD 5670 and above. I saw what Ralphy has recommended and they fit your budget, but keep in mind that you will have to buy Windows separately as it has not been included.
Please also ensure that the PSU (power supply unit) is of a good make. 550 Watts to 650 watts should be adequate.
Further, opt for a processor whose clock speed is at a minimum of 3.0 Ghz. Talking of processors, there may be a tendency for them to heat up when graphic intense applications are running. Automation may increase the speed of the processor fan and in some time they will tend to become noisy. (Well, that's what happened to my AMD Phenom II processor fan). So, please allow your budget to also include an aftermarket cooler fan. Artic Cooler, Coolermaster have good fans.
Regards
vin_sun