Motherbaord - massive 1200mhz RAM, massive 1600mhz OC BUS, this thing will handle anything, and mega price!!
Gigabyte GA-EP35-DS3R iP35 Socket 775 8 channel audio ATX
http://www.ebuyer.com/product/143226
£75
CPU - Intels latest 1333mhz Core 2 8200 2.66ghz, a little overclock will see this hit mega speeds even with the stock fan!!
Intel Core 2 Duo E8200 Socket 775 (2.66GHz) FSB1333 6MB Cache Retail Boxed
http://www.ebuyer.com/product/139967
£119
RAM - get this stuff from here, 1066mhz, lightning fast with massive room for overclocking, will touch that 1200mhz that the board will take easy if you wish.
Patriot Extreme Performance Viper Series 4GB 2 x 2GB DDR2 PC2-8500 1066Mhz
http://www.awd-it.com/Scripts/prodView.asp?idproduct=3787
£67
Hard Drive - wow just seen this at an amazing price, my fav hard drive to tell you the truth AND it has come down in price due to the new releases of 32mb cache hard drives, trust me you will not see any difference between this 16mb cache drive and a 32mb one and these are blumming quiet and reliable drives!!!
Samsung SpinPoint HD501LJ 500GB SATAII Hard Drive 16MB Cache
http://www.ebuyer.com/product/130454
£48 BARGAIN!!!!
DVD Burner - well anything you want really for about £16ish
PSU - this will be more than ample to run the setup.
OCZ StealthXtream 500W PSU - 1x PCI-E 6/8pin, 2x SATA 12cm Fan
http://www.ebuyer.com/product/135159
£33
Case - again your choice for about £15 or so depending on how fussy you are.
Oops nearly forgot you need a crap cheap card also:
Point Of View 8400GS 256MB GDDR2 DVI VGA HDCP ready PCI-E Graphics Card
http://www.ebuyer.com/product/129802
£23
Unfortunately I have gone about £50 over budget as this lot comes in about £400.
Now down to this video encoding thing, it is true that the quad cores will perform better in this task, but the Q6600 is now using older technology, is a little dated and costs £30 more than this e8200. Navigating the desktop, opening apps and gaming this e8200 will beat the Q6600. The newer 9 series of Quads are costing close to £200 and the lower end scale is not looking as good as the Q6600 due to the low multiplier and cache, although it does run at 1333mhz but costs about £180 or so.
So I would say your choice of processors are the one listed above or the Q6600.
The Q6600 will be better for your encoding but it really kills me to use older technology, and to save a few seconds in encoding only to lose it again during normal navigation, is it worth it?
At the end of the day there is no really bad choice between the 2, both are great processors so I will leave it up to you.