Hello Etaywah,
700-1000 dollars is a nice budget, even if you build 100% from scratch. If you can reuse your case, dvd burner, and/or floppy drive, you will be in even better shape.
The question is, are you comfortable with building a system yourself? You can get a great machine if you do it yourself for that kind of money. If you buy an already built system, it's going to cost a good bit more for equivalent specs.
If you're going to attempt to put together your own system, Newegg.com is the place to go and I can give you some good ideas for a place to start. In fact, I just built a solid machine for my brother for 600 dollars. It's built from scratch (only reusing his DVD burner). It is a dual core Athlon 64 5900+ 2.9ghz, Biostar A770 motherboard, BFG 8800GT, 2 gigs DDR2 1066 mhz, 160 gig SATA hard drive.
If you compare that to something at Best Buy say, you'll spend 1500 dollars and still not have as good specs. But building a computer can be pretty challenging if you're not experienced. Troubleshooting problems can be a pretty daunting task.
I would definitely recommend a new setup over that machine however. You'll be replacing the entire inside of the computer if you chose to upgrade anyways.
