The RAM from the old machine cannot be reused. DDR and DDR2 are NOT compatible with SDRAM. 

I'd advise to scrap XP Home and get XP Pro 64 bit. Only slightly more expensive, but far better prepared for the future, and less vulnerable to viruses and other crap.

IF you're going to use XP Pro 64 bit, DON"T buy ATI. The few 64 bit drivers for ATI are crappy betas. nVidia has good solid 64 bit drivers.

A midtower case has 4 5.25" slots, which means you can put in up to 4 5.25" units (CD/DVD drivers). Full tower cases often have 5 or more 5.25" slots.

CD and DVD drives/burners have IDE connectors. Most newer mainboards only have one IDE slot, allowing up to two IDE drives. Some still have two connectors, allowing up to 4 IDE drives.
The requirement for more than two optical drives severely limits your choice in mainboards!

Older stuff is not necessarily cheaper. For example, I was scrounging around for an Athlon64x2 4400 CPU Socket 939, they're being phased out in favor of the Socket Am2 version. The cheapest one I found was only 5% less expensive than the one I bought when they were just released on the market.

So I'd still recommend going for current mainstream stuff. The Intel E6300 CPU sells for less than $200, any older CPU that is as cheap as the E6300 doesn't have half the performance!

The pen is mightier than the sword. But if you literally want to have some impact, use a typewriter

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