if you have 1000, sur eyou can fit an athlon xp into your budget. But when 64bit comes around in the next year or 2, you will be able to run it with a 64bit processor much better. The best xp processor is the 3200+, and that costs about 130 bucks if i remember right. For the athlon 64 3200+ (socket 939), the price is about 170 or so. So fir the extra 40 bucks, you will be able to get a much more "future proof" (i hate that phrase) processor and it will perform a bit better because it is built better. With a socket 939, you also have the option of getting a PCI-E graphics card, which can save you about 30 bucks on average than thier AGP counterparts.
So with that bit of knowledge, heres a rundown of a setup you might be able to work with:
Athlon 64 3500+ (skt 939)
Fast, Great for games, will run anything. Also very overclockable. In my opinion best bang for buck processor out there.
Abit "AN8" Motherboard
Abit is a great manufacturer of motherboards, and you cant really go wrong with this board. You can do anything with it you like...
Corsair 1 gig Value RAM (512x2)
Cheap, reliable, does exactly what it is supposed to do. Also best rated on Newegg fyi...
Western Digital 160gb SATA Hard Drive
Only 90 bucks, and unless you download a TON you should never fill it up... and if you do you can always get another one. Make sure to get SATA drives because they are much faster.
The best bang for buck card right now. Runs every game close to high settings. Also, EVGA is a great manufacturer of cards because they put good heatsinks on the GPU and thier cards wont crap out on you within the year.
Total of all that should be around 800, so you have 200 to spend on a case, power supply, cooling (heasink/fan for CPU and case fans), and such. Shouldnt be too hard to do that. If you seem to still need a bit more cash, downgrade the processor to the Athlon 64 3200+ (skt 939) and that should save a good 70 bucks or so.
Have fun with the computer!
EDIT: My bad, i just had a look at the 3500 again and its like 300, so the total would have been 850. Also the OEM Athlon 64 3200+ is only like 170, so youd be saving 130 bucks over the 3500. The Athlon 64 3200+ may be the better choice....