1) Processor: Should I go for quad core? duo quad core? What speed? Size of L2 Cache? Bus speed?
Quad core seems the sweet spot right now; I don't know how much software can use two cores effectively nevermind more, so I wouldn't stress about more than a single dual or quad core Intel processor right now. (Fingers crossed AMD get back in the game, but I don't think they're competitive at the moment.)
2) Memory: DDr2? DDR3? How much RAM? WHat speed RAM?
DDR2 is still cheaper, or was last time I looked a few weeks ago. I'd be dubious that you'd see any speed difference between DDR2 and DDR3 or even different bus speeds (but could be wrong; the answer to all computer performance questions begins "Well, it depends ...").
Buy memory to match the bus speed of your processor and motherboard, and perhaps prefer DDR3 if your budget allows ... but more DDR2 memory will be better than less DDR3 memory.
RAM is important. For a PC it depends on what operating system you're planning to run: for a 32 bit operating system, you can't use more than 4GB (or even all of 4GB, but the reason for that gets technical). For a 64 bit operating system the limit will be defined by the hardware (usually the motherboard).
If you are planning to keep this system for a few years, I'd recommend that you look at a 64 bit OS and think about getting 8GB+ of memory. (Yeah, I know, who needs more than 640KB? ALL OF US!)
3) Hard Drive: SATA is probably what I could get, as RAID is probably out of my financial reach. Should I look for 7200 or 10000 RPM drives?
SATA is all you'll be able to buy; serial attached SCSI (SAS) and similar will be outside your price range; parallel ATA (a.k.a. PATA a.k.a. IDE) is too long in the tooth to worry about, plus has become more expensive than SATA anyway.
Consumer drives are 7200rpm. I would be concerned about heat and noise from a 10,000rpm drive, but maybe they're OK now. I have no personal experience to judge; the fastest drives I've run have been some 500GB Western Digital SATA drives.
4) Video card: how much video ram? ATI Radeon or nVidia? I also use two monitors.
I don't think the amount of video RAM much matters ... it's gamers looking for high end 3D performance and textures who want the high end cards. For 2D applications such as Photoshop the requirements are relatively modest (although I see that CS4 may start using the graphics processing unit (GPU) on video cards more, so that may change). (One thing about the computer industry, it keeps changing!)
Note you have a choice between two video cards, or a single card with two outputs. I'd lean toward two cards (but you don't need SLI or Crossfire or whatever it is unless you're also into games) since you can calibrate two monitors connected to individual cards, but often (usually?) only one when connecting two monitors to a single card.
Just now I would not buy a Nvidia anything: they've a reportedly serious quality control problem on just about everything they've manufactured in the last year or so(?) according to some industry sources, e.g. www.theinquirer.net
. The worst problems seem to be with notebook video adapters; I'm waiting for my MacBook Pro to break. (It's already had the faulty LED LCD, and Apple's service was atrocious -- so bad that I'm dubious that I'll buy any Apple equipment again.)
6) Brands of PC worth getting: I've always got Dells, but I'm open to other choices that may have a better performance/price ratio but still have really good reliability.
That really depends on what your local service is like from the different vendors. All the major vendors produce OK systems -- with occasional lemons -- but not all service is equal. In Australia I would never, ever buy any HP consumer equipment due to multiple dreadful repair experiences, and I'm rather off Apple too. (While Apple's problems are exacerbated locally by their largest reseller and outsourced repairer being under financial stress, Apple's arrogance in never admitting that they've built something wrongly no matter how well documented the problem is within the industry is very irritating). I have no experience with Lenovo.
Dell locally are tolerable, although their hardware quality isn't any better than you pay for, and you want to wait for a special that suits you -- their regular pricing typically isn't great, at least in Oz. They do offer warranty extensions at reasonable cost to cover next day on-site hardware service, and don't argue unduly about providing such service.
The trouble with buying any system from one of the name vendors is that you don't know what's in it with any degree of certainty; building your own system no longer saves much or any money, but you do get to choose all the components.
For third party memory I like http://www.crucial.com
better than I like the lower tier memory suppliers the major vendors usually use; Kingston are also highly regarded and recommended.