Phenom IIs are more powerful, overclock better, and use less power than the original Phenom series. They're just a better value all around -- even though an X3 720 is a bit more expensive, it'll make up the difference by running better and keeping up with new games for a longer period of time.
The GPU isn't as dramatic of a change, but the GTX 260 should be a good ~10% performance bump for only $10 more.
Any particular reason you need an Intel processor? AMDs are a better bang-for-your-buck at the midrange these days.
If you want to go Intel, I'd aim for
something like this. Depending on the discount you get from your uncle (and whether you plan to reuse your case/power supply), you might be able to upgrade the GPU to a GTX 260, or bump the processor up to an E8400 and still come in under budget.