Hey,
If someone is starting out I always suggest that they go the software route for a bunch of reasons:
1. Cheaper than hardware.
2. Often more powerful than hardware, this depends on the speed of your machine.
3. Soft synths integrate with most sequencers.
4. POWER in composing, editing, mixing and mastering.
5. There are more softwares being released than hardwares.
6. Easier to use.
But, if you ALREADY own hardware, you shouldn't give it up:
1. Hardware keeps its value a lot longer than software. Example: two 303's, an 808 and 909 in hardware will run you close to $4000 second hand; you can get the same in a program called Rebirth (Reason's daddy) for about $150 new, good luck selling it for more and $50 used nowadays.
2. Reliability. We've all had computers crash or run out of steam. Hardware RARELY crashes, I've only ever had samplers crash on me.
3. Uniqueness. Everybody and their mom runs Reason and Fruity Loops, but only a few people have the same hardware I do. Also, software can be copied, hardware cannot.
4. You can run hardware without a computer.
5. WOW factor. Nothing gets a girl to show me her rack faster than me showing her mine.
6. Synth manufacturers have been making sound banks for almost 20 years and know what they're doing; soft synths are still relatively new and most of them are simple analogue emulations, there are only a small handful of software sound modules (like SampleTank). You can hear the quality difference when you play a hardware synth over a software counterpart.
7. You can sequence and record audio from hardware on a slower machine because it doesn't require as much power to do MIDI and audio. It does take a lot of juice though to do MIDI, audio and softsynths on the same machine.
8. Compatibility. Because software is OS dependent, you are screwed if you decide to update your machine and the softsynth manufacturer decides not to release a compatible version. Perfect example: Emagic used to be a PC and Mac company, they made lots of great softwares which ran on both platforms. Right before Apple bought them they released a 'super' version of their sequencer and synths/sampler, which a lot of PC users bought. After the sale to Apple, Emagic canned all PC support, and now those PC users are left with software which they cannot upgrade in the future. You never have to worry about that with hardware.
To answer your question about the PC:
I can't believe that Dell is STILL selling the PIII, that thing is so old it hurts. I run a PIII 860mhz which I built over 3 years ago, it was getting long in the tooth then.
However, a PIII will be plenty to do sequencing, recording and some softsynths. My second record was recorded using audio, MIDI and some softsynths on a PII-350mhz back in 1999, the PIII should suit you fine.
40GB is plenty for audio recording, especially as you're just starting out. Drives drop in price every day, no need to get a huge one now as you won't be maxing it out for a very long time. Make sure though that it is an ATA 100 7200 RPM drive.
I try and stay away from anything 'integrated', in the past for me it has meant more conflicts and less quality, especially when it comes to sound cards.
I recommend that people get at least a 16x AGP video card when doing audio work, this way there is much less chance of the processor being used to handle the video work instead of the audio. I don't even know if you can still buy 16x cards, they're up to 128x + nowadays.
If you can, get more PCI slots. Figure that one of them will be used on your soundcard; that will leave you with only one more, and if you use it up, you won't be able to install anything else on your machine.
Make sure that your USB ports are v2.0, most USB hardware nowadays runs at that speed (40x times faster than v1.0), it would be a shame to get something like a scanner or soundcard that runs at 2.0 but you can't take advantage of the speed.
You will probably NEVER EVER use the serial and parallel ports unless you have older modems and printers. Some software dongles (hardware protection devices) plug in here, but most are moving to USB now.
No OS or drivers? Stay away from that machine. You'll still have to buy Windows (about $300) and find the drivers for that machine. Without drivers you'll have a hard time even turning it on, unless it will run with basic Windows drivers and allow you to update over the net. If you're buying it second hand from an individual, you may be able to get these from Dell, maybe even with a discount.
However, for $179 I would buy the machine if not to have as a second computer to do my non-music stuff.
512mb RAM is a TON of RAM, especially if you're running something like 98. My machine has 256mb and it suits me down to the ground.
Some more thoughts:
Why are you getting an 88 key controller? I mean, that's a LOT of keys, are you sure you really need that many? Is your Motif the keyboard or rack version?
If you get a computer, will you be sequencing with it or still using the MPC? Because if you're going to go the software route, SELL your MPC. My answering machine has a better sampler engine: you can get some pretty amazing rack hardware samplers (like the Yamaha A-5000 or Emu 6400 Turbo) for less than you can sell the MPC used. They will load your old Akai samples, by the way. That, or you can get a pretty good software sampler like Kontakt.
If you get a computer, you probably won'y need to get the 8-out option for the MPC as you'll probably be mixing on the computer.
Hardware is coming back? I should be so lucky...
Take care,
Nick