Nice, thanks for the perspective.

I wouldn't use that motherboard in 1000 years,
Why not? I've had good luck with Biostar boards and I've been building PCs for 18 years.
How about this for the same price:
http://www.newegg.com/Product/Product.aspx?Item=N82E16813138179
...or this for $5 more:
http://www.newegg.com/Product/Product.aspx?Item=N82E16813157176
the ram is slow by modern standards,
First of all, it's not. Second of all, the effect of RAM speed on system performance depends on system architecture. AMD systems don't run much faster using DDR3 than DDR2. We're talking low single digits as far as framerate differences in games.
If you insist, though, here's DDR3 to go with the alternative MB above:
http://www.newegg.com/Product/Product.aspx?Item=N82E16820134718
Add a whopping $10 to the price.

What? Um, no it isn't...at all.
and the graphics card is really on the edge of old (5770 is at least 2 years out now)
First of all, it's not (5700 series came out at the end of 2009), but why would that matter? Would you like me to include a video card that is extreme overkill for the application? What would be the point of that?
and to be frank you absolutely have to include the monitor in the price of the computer. Most families already have TVs, and most kids parents buy the TVs, whereas with a computer your stuck in getting a monitor of Some kind - we're talking about the majority here after all.
Not a valid argument. Most people already own a computer, so they own a monitor. It's no different than claiming you already own a TV. Besides, any recent TV will accept a computer as an input.
And I'm sorry but Speakers have to be included, TVs have them, computers do not.
Again, most people will have speakers (see above), or the computer can be connected to a home theater system or a TV. I do it. It's really simple.
I think if you add a decent $150 17" flat panel and some speakers, it would get upwards of $700 for that PC that can do Fo3. But thats splitting hairs, your point is strong and valid that a low-end PC can run vanilla Fallout3 in a decent mode.
It's not that the setup is all that "low-end," it's that hardware is a lot cheaper than most people think it is. This configuration blows current consoles completely out of the water as far as performance.
Anyway, I'm not arguing your point, just your pricing.

The fact is that a PC that can max out FO3 isn't very expensive.
Edit:
Just noticed I didn't include a DVD drive, so add $30 to that, or $70 for a blu-ray.