prebuilt will give you less options and worse hardware.. on a max 650 budget you will want to look at AMD processors as they give more bang for the buck. Do you have any old hardware you can re-used to cut costs? Processor/mobo/ram will run you near if not more than 1/2 your current budget in order to have "good" power for editing.
EDIT- dang earth.. you're on more than me!
FYI- if you have a .edu email addy you can windows7 for about 32 dollars.. saves you over 70 bucks!
Since Windows 7 came with your laptop it's oem and useless cuz u can't install it on something that's not made by toshiba, plus its a violation of the EULA and you'd need another activation key anyway.
Like EarthDog said, you'll probably want a quad core and four gigs of RAM. Depending on what you're doing, it might be nice to have a separate hard drive as a scratch drive - that can speed up encoding/decoding significantly from what I understand.
Poking around at Newegg gives me this:
Q9400 - $190
A good motherboard - $100
2 x 2GB of decent RAM - $85
That's $375 of your budget right there. You should be able to fit in a good case and a decent PSU for about $90, maybe. You'll get a lot more bang for your buck if you plan to overclock - you wouldn't have much trouble getting that 2.66GHz CPU up to 3.6GHz.
That's $465 + whatever video card you choose. You probably will get more bang for your buck (if you're on a really tight budget) if you go AMD, but I'm not up to date on what's happening on that side of the fence.