Good idea. You have a lot of good choices. Remember, 2 GB of RAM is crucial to multitasking. If you ever edit movies or Photoshop, make sure you have a good CPU as well.
First of all, 1000 bucks is what is referred to as the "Budget PC."
Here are a few recommendations for your PC, whether you're building it yourself or looking for a prebuilt PC.
CPU - Intel Core 2 Duo e6300 or 4300
RAM - 2GB RAM (look on newegg.com if you want help with this)
Motherboard: This one looks good:
Graphics card: Get a nvidia 7600 GS
Feel free to move up on the CPU or graphics card as needed. I think a 7900 GS is a good step up from the 7600 gs, and a e6600 is a pretty good CPU for the money. Don't buy anything AMD; their systems are not as fast as Intel's as of right now.
As for whether to switch to Linux, well, Ubuntu and Gentoo are considered fast Linux OSs. They're lighter than Windows, but can't game or use exclusive Windows applications such as Adobe Photoshop. Otherwise for ordinary chatting, surfing, and document editing, Linux is fine, free, and fast.
For the "completely suck" problem, i.e. the obsolete technology problem, well, PCs generally get 2x as fast every 2 years or so. Basically you might want to learn how to overclock to speed up your PC or get a new one in a few years.
I forgot about the hard drive:
For music, well, a 120 GB hard drive is pretty good. If you want to backup DVDs, a much larger (400+ GB) hard drive is recommended. Getting 2 hard drives is not a bad idea. Use 1 for ordinary PC use, and the other for storage. Also, get a Western Digital Caviar or Seagate Barracuda 7200.10 drive for fast speed at a bargain price. Don't buy Maxtor; they have a bad drive history.