I second the 4850, it's what I'm using.
You can find them for under $150 now and they will play anything you throw at it. Only game I can't play at 1920x1200 is Crysis on max settings, it'll only run about 10-20fps. FEAR 2 and COD5 WAW I've been able to play at 1920x1200 with max settings at a playable framerate without any problems.
Running a quad q6600 @ 3.6ghz overclocked on aircooling. OCZ Vendetta2 (and it's lookalike, forget the brand) are the best CPU air coolers according to the last reviews I've seen.
Dual core should be plenty if you just do normal apps and gaming. I only went with a quad because I do h.264 video encoding which will use all cores at 100%. Encoding at the stock 2.4ghz 2nd pass would only go 2-4fps, and at 3.6ghz would go 5-7fps. 12 hours to encode is a big difference compared to 18 hours at the stock speeds.