I'm assuming you're getting these from Newegg, since that's where the links go.
IS7-E motherboard, Socket 478: $81
Pentium 4, 3.0 E Prescott, Retail: $185
ATI Radeon 9600XT, All in Wonder: $187
Windows XP Media Center, OEM: $128
My suggestions are slightly different. Unless you need a video card with a TV tuner built in, or are planning on capturing and encoding video, avoid the All in Wonder cards. Is that what you're going for, with the Media Edition operating system? If that's what you're planning, then this is fine. The Prescott processors are nice for encoding, and going with a better, but older, version of the card (9800 Pro AIW) was $254 instead.
Now, if this ISN'T what you're planning on, then I suggest the following instead:
This costs a little more than what you planned on, but it will perform a LOT better. The Prescotts are better at media encoding, but the Athlon 64s are no slouch at it either. You can use the Media Center edition if you want to instead. If you're planning on capturing video or playing TV through the computer, you'll either need to switch out the video card, or buy a separate video tuner card.
If you bought a retail processor, then it comes with a heatsink and fan. If you bought an OEM processor, it's going to come without a heatsink, or a fan, or a warranty. And I think you might have a problem here. The model 530 Prescott is for Socket T, the LGA775 setup. The VT7 motherboard is for Socket 478. Did you order this or this? The first is NOT the one you need for that board. The second is the one on the one day sale at Newegg.
NSA, have you ever built a computer before? Thermal compound is a paste like substance that goes in between the processor die and the heatsink. It allows heat transfer between the two, and fills up any spaces left by gaps due to position or imperfections in the surface of either. Every time I've seen a heatsink, it can either come like the processor does, in either a bare or a retail package. The retail package includes a fan and a small container of some thermal compound. When I was checking on Newegg, they were out of stock on the retail version of that Alpha heatsink, while they had the bare version. I own an Alpha heatsink myself (PAL8045, for Socket A), and I bought it in the bare version, so I can say from experience that it doesn't come with any thermal compound.
Arctic Silver is REALLY good. I've seen several test results, where Arctic Silver results in several degrees Celsius lower temperatures than the usual stuff you get. I've been using it myself, and that small tube will last me forever, because you just don't use that much. Just to give you an idea, I'm running an Athlon XP 2000+ processor on my computer, on an Abit motherboard. The board has a temperature sensor under the CPU socket, and I've got a software monitoring program that came with it, that will give me the various temp readings, voltage readings, and fan RPMs on the various components of the motherboard. Sunday, I got up and turned my computer on about 8 am. That computer was on all day long (played Civ 3 most of the day). Sunday evening, about 9 pm, my processor temperature was 39 C (102 F), while the system temp was 34 C (93 F), and room temperature was 24 C (75 F). From experience, that's a really good CPU temp for an Athlon processor of any type.
As far as Windows XP Pro vs Home, I think if you run a home network, you have to have Pro. At least, once upon a time, Microsoft was saying that XP Pro was necessary to join a domain with the computer. I can't find the feature comparison they used to have posted. The current one is here. Based on that, there's no real reason for most people to need Pro. I don't know if MS changed the components included in Home, or they were lying the entire time. I'd believe either possibility.
quillan, thanks for clearing that up. i would've certainly looked over that. and to answer your question, i have never built one myself and am planning on doing so in the near future. for now i'm making a list of components i'd like to get. so far i'm well under budget.
as far as XP Home/Pro goes i never really knew that either, but i think i'll take my chances on Home.