As others have said, some tech guy lied to you.
Try using Pricewatch
to do a little shopping. Check Tiger Direct
are also great shopping sites and they tend to be a little easier to deal with on the off chance you were sold a broken item.
I think I was about 12 years old when my father managed to misconfigure the boot chip on the motherboard and told me, "It's your computer, if you ever want to use it again, you fix it!" Great learning experience for both of us. I learned about how a computer works, my father learned not to play around with things he didn't understand.
Your preteen could put together a component shopping list within your budget. Have him tell you why he's getting everything. ("Johnny, why 2 gigs of RAM? Wouldn't 1 be enough?" "Mom, if we only get 1 gig, a lot of programs will be using the hard drive as extra memory, and that really slows things down.") If his answers don't make sense or he's not sure, you can probably find a few tech geeks willing to lend a hand around here.
One thing I will say is that you want to get yourself a copy of Windows XP soon. On June 30th, Microsoft will no longer sell XP. Even now people are hoarding new disks and smaller retailers are running out. I expect the price to jump on the 1st of July. XP Home should be good enough since you're not running the fancy networks XP Professional supports.
When everything arrives in the mail, you have a great Saturday afternoon project!