if i was going to build again in that price range i would go with an AMD Athlon 64 2800+ Processor Skt 754 & MSI K8N Neo Platinum nForce3 for about $225, Hyper X 512mb ram for about $90, a radeon 9800 video card for about $200, 80Gb hard drive for about $70. that equals $585 so you have 115 for a power supply, possibly a case, a cd/dvd drive, and maybe some fans.
If thats to much i would go with a set up similar to mine:
Athlon xp 2600-2800+( should be able to fine one for around $90), an MSI nforce mobo for about $65-70, 512 kingston hyperx ram for about $90, probably the radeon 9800 video card $200 for your gaming, 80gb hard drive for about $70. which is $520. then a case of your choice probably around $70 for a fairly decent case, a CD-RW/DVD drive for about $40, and an enermax 370W power supply for about $60. which totals 690. a few bucks extra for some further cooling or looks.
the second may be a better choice because your parents wont need the speed of the AMD 64, my xp is plenty fast for me.
i think that would be a good all around rig for your folks.