I'm am currently using the first computer I built myself from scratch (2.5 years ago). I had done upgrading before then (ram, HDD, CPU, etc) but never build my own.
I found it to be no more difficult than a major upgrade. Most of the work is installing the O/S and software it seems.
It definitely makes you less scared about screwing things up, because as long as you back up your important data then you know that you can always rebuild the thing if something goes awry.
My current system is:
Athlon Xp 1800+ (palomino core)
Soyo Dragon Plus
ATI R9700 Pro (just got this at beginning of year, was GF3 Ti200)
512MB RAM
2X IBM Deskstar 40GB in RAID 0 (80 GB total)
ON BOARD AUDIO
This is probably close to what you can get for $400 (except maybe the vid card). Overall, the system is very nice, but I've noticed that Halo and Far Cry don't play very well (CoD is very smooth, and UT2004 demo is good in fairly enclosed areas @ 1024x768). So you should have very good performance in most games since my GF3 was fine up until CoD.
Oh yeah, I saw some questinos above:
1. FANS - I currently have one 80mm fan (spinning @ 2800 RPM) in the back of my case, plus the one in the PSU. Seems fine (case is Aopen H600A).
2. RAM - I would buy 1X512 since you would have more room for upgrading in the future. Also, less chance of failure since less components.
3. I would avoid on-board video, mainly because the on-board solutions are crap for gaming (except maybe the very recent ATI chipset, but that's only for Intel). Also, you if you want to upgrade the video it is nice to be able to sell (or donate) the old card.
4. On board Audio is definitely fine for me. It seems like Audio technology has been relatively the same since the good ol Sound Blaster PRO (8 bit card if I recall). Obviously we have many more channels now and finer resolution, but unless you are doing some serious recording or hooked into a home theater system you probably will have a hard time hearing the difference between on board audio and an external card. I have my audio hooked into a plain old 100W stereo receiver with a subwoofer and two Boston Acoustic sattelite speakers, and I really like the sound, and I'm not even using the 5.1 capabilities of my on-board audio.
Anyhow, good luck and have fun.
-D'oh!