I personally am more in favor of building up but that's just b/c it seems to be working out okay for me...

I started with a bike that I already had, stripped off the old components.... and I am in < 400 so far. Here is my list:

(2) Tires @ 26.xx each
2 tubes @ 7 each
Crankset @ 39.xx
Bottom Bracket @ 8.xx
Handlebars @ 14.99
Brake Levers @ 17.99
Cross brake levers @ 15.xx
Bar-end shifters @ 56
stem @ 17.xx
quill - threadless adapter @ 17.xx

total there (rounding up to the next dollar) is 257. Add in maybe another 30 or so for shipping. I still have to buy a seat & seatpost (unless I use the old ones...) and I am going to get a new rear wheel/cassette
I am using deraillers that I already had so of course that is a huge savings.

If you're smart, shop right, wait for good prices, maybe source some parts from friends, craigslist, etc you can get out relatively cheaply. Not to say the bike will be better than what you could have bought but maybe cheaper. If you have to buy a frame though, forget about it. Buy a bike on CL, make sure the frame is the right size, and (re)build it up, using what you can from the original bike. Do your homework, trust the knowledge of others for guidance, read everything you can find, talk to the guys at your LBS, and you will learn a lot, get a lot of satisfaction from your build, and have your bike set up the way you want it (for now) For me, it has been very rewarding. Will I end up changing things out down the road? Probably. Might I even end up buying a 520 or LHT down the road? It's possible. But all said and done, I can ride my bike for < $500 & I have learned a lot by the build.