Upgrade to 9600GT for $20. It's much more powerful and will completely own games like L4D and COD4. 8600GT is weak.
As for a motherboard, I'd recommend the EP43 motherboard from Gigabyte. Lots of great features, stable board, decent BIOS and a good price.
For the processor, I would go with the E7200 Core 2 Duo from Intel. Plenty of power and an amazing price.
You can get 4GB of memory pretty cheap (2GB for about $30 so just under $50 for 4GB). Stick to the decent brands (Corsair, G-skill, GEIL, OCZ etc).
Don't cheap out on a powersupply. The CORSAIR CMPSU-450VX should work quite nicely.
Operating system? I'd recommend Vista 64-bit. I've been using it for months, no problems. Good driver support, and it can address more than 3.5GB of memory.
Hard drives, just stick to the good brands (Seagate, Western Digital, Samsung). As for CD Drives...thats your pick. It doesn't really matter. You can get BlueRay disk drives if you want to watch some HD movies on your computer.