AFAIK Core 2 Duo should be 400-800MHz or more ahead of AMD.
ie. If X2 4200 is clocked at 2.6, it may just be a rival to E6400 at best.
Anyway, E6400 is overclockable as well, and once you overclock it, AMD can't win.
I am assuming that you are not look for a gaming solution.
E6400 - 10500, for overclocking
else E6300 - 9000
MSI Neo G 965 - 6500
Upgrade the mobo later
alternately get E6300 with a better mobo
2 X 512MB DDR2 667 Corsair Value select or other RAM if this is not supported
160GB SEAGATA SATA II NCQ