I'd recommend you do go for a PCI-E LGA775 system. You don't need a video card if you get onboard video, and there are some fairly cheap PCI-E video cards later. In the future you may find PCI-E to be a very advantageous feature for a system being used for multimedia applications such as video encoding. There's also the fact that LGA775 will provide some upgradability, as opposed to none, which is what socket 478 will get you at this point.

For your RAM, I'd highly recommend you stick with 2x512MB of RAM. Unless you encode multiple large videos at once, you'll get performance reduction from anything more. You should probably go for DDR for the price, but I guess DDR2 wouldn't be totally out of the question.