Here are the most current CPU charts. As you can see, all of the top spots are Intel i7. But drop down a bit and there are the i5 and AMD processors, nearly as good but priced significantly lower.
http://www.tomshardware.com/charts/cpu-charts-2013/-36-Total-Time,3179.html
Cross-referencing this chart with the availability and pricing at Newegg, there are several stong-performing and highly-rated quad core AMD processors for well under $100. Should be more than sufficient for your intended use.
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I think you'll be happy with Windows 7 64 bit. If you have real concerns about it running older programs, there is an "XP Mode" available with Windows 7 Professional.
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I have built many computers, including recently a higher-end machine dedicated for photo and video editing. Here's the basic shopping process I use. You aren't far off.
- Set a budget.
- Select processor.
- Select motherboard to match processor.
- Select RAM to match motherboard.
- Select graphic and sound cards (for a basic office/internet system, the onboard components will be good enough)
- Add hard drives, optical drives, and other components.
- Adjust as necessary to match budget.
Don't forget the potential savings from re-using your existing computer components. Case (if it's a standard ATX), monitor, keyboard and mouse, DVD drive, sound card, speakers.... Much of that stuff has not changed in years, and many new motherboards offer backward-compatible features. If you have older PS/2 keyboard, for example, there are still motherboards available with PS/2 plugs. Floppy drive slots are getting fewer and father between but they are out there. And many motherboards offer both the modern SATA plugs, and the older IDE slots for re-using your current drives.