I'd definitely agree it's good to have someone around to help you do it the first time.
It's a lot easier than it was in the old days*; you're not going to bend the pins on the processor or crack it when you try to wedge one of those horrible seesaw heatsinks on it. (Main thing to remember is stay grounded -- you can do that by frequently touching a piece of unpainted metal somewhere on the chassis -- and to tighten screws tightly but not TOO tightly.) But if you can find somebody to help walk you through it, it's a lot less frustrating.
And Brent's right about building an HTPC. I built one four years ago with parts that were cheap and/or already lying around my house, and I've added a hard drive here and a video card there but it's still mostly the same machine I built back then and works great for TV and movies (and now, with the used GTX 560 I got at Bookman's for about $75, 1080p gaming too). It's something you'll get a lot of value out of in the long term.
I probably wouldn't use an HTPC-sized case, though; I think it's better to leave room for full-size cards and have a more easily upgradable machine than to save a few inches of space. (Or even a few feet, in my case; the mini-ATX case I put my HTPC in is just slightly too large to fit in my entertainment center and so it sits next to it. Though it's probably better that way; it's better-ventilated out in the open and I can reach the cables in the back a lot easier.)
The NewEgg machine is overkill for an HTPC but underkill for a gaming box. Unless you plan to use it as a secondary machine for, say, LAN parties, or think you can get a good deal selling it once you get your new system, I'd probably go for something lower-end as a practice machine.
* actually, when I built my first computer Intel was using that cartridge/slot style processor, so it was pretty painless. But my next couple after that were scarier.
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Well that's what's being pointed out, it's a waste of money. You won't be able to reuse anything except the case, and a lot of parts are interdependent - you can't replace the processor without replacing the motherboard with the right kind of socket, and etc.
Right, this. New processor means new motherboard; new graphics card means new power supply. That NewEgg box is not a good fit if you're looking for something you can upgrade incrementally into a vastly better machine. Don't get me wrong, you can upgrade it incrementally and maintain it as a midrange gaming system that will keep on chugging for years, but you're not going to put an i7 and dual GTX's into that thing. You're better off buying a lower-end machine now and saving up until you DO have the money together to buy your whole gaming system at once.