The world is filled with mediocre computers that cost $500 or less. Some look better than others. What I want, indeed, what would set the world on fire is a $500 computer that looks great and can play games. Considering the onset of digital TV in February of 2009 will create the need to encode and decode HDTV streams, a computer with decent graphics is more useful than ever. You have to think about the total package when you buy a computer: who want's to end up with an expense e-mail machine?
To me, the perfect candidates for an inexpensive, good looking, productive, and high gaming perfomance computer are be the Apple Mac Mini and Xbox 360. The Mac Mini looks great and was a decent gaming machine by 2005 standards. The current version, hover, creates negative pressure around spheres. Perhaps Apple could upgrade the Mac Mini with some decent graphics, but on the subject of $500 computers, the CEO of Apple recently had this to say: "We don't know how to make a $500 computer that's not a piece of junk; our DNA will not let us do that." Interestingly, the original Mac Min cost $499, making it, in Steve Jobs's words, junk. Maybe they've had gene therapy since then.
The Xbox 360 is another decent looking computer but it has the opposite problem. It is a great graphics platform that can't be used for anything productive. It has the cability to do other things. Behind the svelte case is a triple core PowerPC processor, 512mb (i.e. barely enough) RAM, and up to a 120GB hard drive. Yet Microsoft, because it also creates negative pressure around spheres, has locked down the Xbox 360 and limited its use to games. I do note that the PS3 plays games as well as the Xbox 360 and Sony generously lets us peoples load up other operating systems. Too bad the PS3 only has 256mb (i.e. not enough) RAM for productivity applications.
There are some able contenders for a svelte $500 dream machines. The cheap looking Acer X1200 and X3200 cost less than $500 and have decent integrated graphics that can be upgraded using fancy hybrid SLI technology. The HP Pavilion Slimline looks better than most computers, can also be upgraded with decent graphics, and some deals are available. An upstart Linux machine claims to be the next big thing in gaming, and it may eventually cost less than $500. The Asus Essentio is the most jaw droppingly good computer I've ever seen. I think it looks ever better than the Mac Mini, and if it ever offers decent specs for less than $500, it'd be a game changer. Although all of these contenders run Windows, an arguably crappy operating system, they can also run linux. Some games run native on Linux and other will, with a little help. As noted in the comments, a great small computer can be built from scratch for even better performance for the cost.
But maybe with the recent price drop of the Xbox 360, it may make more sense to buy two computers: a $200 Xbox 360 arcade for playing games and something like a $300 KPC for productivity. $500 gets you two pretty good looking little computers, and for a bonus, a the productivity computer can stream audio, photos, and video to the Xbox 360. Movies are best watched on the couch, y'all.