Greetings -- I just joined today!
Skyrim is THE best looking PC game ever made if you upgrade the textures. I play it - heavily modded- more than anything else. I have good news for you. The most important thing you need to have is a good Graphics card . Before upgrading to my 680 card I was playing maxed out, and with AS and AA forced on in the Nvidia control panel at 16XQ, with zero lag even in combat. This was on an Overclocked Gigabyet GTX 470 Super Overclock board on a 6 year old EVGA board with an Intel Core 2 Duo (overclocked), 4 gigs of ram (and 4 gigs ready boost) and a 1000 watt PSU. That proves that the Graphics processor and its memory are your primary considerations.
Go to some computer magazine sites and search for their budget PC builds. Maximum PC has a few good recommendations for entire builds within your price range. I also advise you to have a good PSU with about 700 watts - more than is typically recommended with lots of power on the 12 volt rails. I also advise you to scrape together some more cash; take a few more weeks, it will be worth it.

digitard wrote:
I still think the i5 2500K is one of the best "bang for your buck" chips on budget builds. With nothing but minor tweaks (and a Corsair H60 cooler) I have mine running at just shy of 5ghz stable.

Does that cut life out of that CPU OC'ing it like that?

m3ga008 wrote:
Does that cut life out of that CPU OC'ing it like that?

It definitely can. As long as you minimize heat, and don't spike voltage, you should for the most part be okay.

With the H60 running, and the fact my house is all tile/wood so the floors are cool, it runs in the summer about 39-41c and 29-34 in the winter. If I did some actual cable cleanup, and really configured the case fans to be a perfect push/pull setup it would probably run a little better. As is, though, in it's generic configuration it's never gone over 59c even completely loaded.