I have to agree with Goh on the i5. Although I've never tried either an i5 or an i7 system, all reviews and info I have read on both have indicated that the i7 only comes into its own for professional work where multiple cores are crucial. For a gaming system, all signs point to the i5 as being the port of call, so to speak, for gaming - and it saves you a good $100. But stick to the K series. The K signifies that it's open to overclocking and although you may not overclock for some time, it can be a great comfort to know you can get more - the i5 and i7 K's have been reported to reach 3.2ghz without breaking a sweat.
I'd also strongly suggest that you get no more than 8gb of ram unless you know you require more for your profession. Realistically, there are literally a handful or so of games that will utilize more than 3gb of ram and those few that do will still run more than acceptably on 4gb of ram. With ram, what you want to consider is what the highest usage will be per program plus what windows and your pagefile (virtual memory) will use. With WinXp, this tops off at 3.3gb, with Win 7, it's more around 4.5, all things considered. 8gb of ram ensures plenty of headroom for anything coming our way in at least the next 2 years and buying two 4gb sticks means that should you find yourself needing more later down the line that it's an easy and cheap upgrade to 16gb.
As far as graphics go, I'm a personal believer in sticking to the middle-line. The GPU manufacturers like to tout "the fastest card" every season but the reality is that it will provide only a marginal improvement over last season's "fastest" card. Because the difference between last season's (not even last year's) top of the line card and this season's is so small, you're better off going for the middle of the line card that will, in most cases considering the games released over the last 4 years, see you being able to run high/medium at respectable framerates. Should you find that your GPU becomes the bottleneck of your system, it's easy to double up with a second card of the same type to improve your performance (again, in most cases. There are certain games, and certain settings that won't play well with crossfire/SLI). It's also worth keeping in mind that with the latest and "greatest" cards comes a pricedrop in the lesser cards. I honestly, even if you had the money to burn, would never recommend buying the "top-of-the-line" cards.
As far as motherboards go, I'd stick to the P67 chipset (as far as intel CPU's go) rather than going for the newer Z68. The motherboard I'm eyeing up for myself is the Asrock extreme 6, it's rated as one of the best P67 motherboards out there at the moment and doesn't ask for too much cash but should you find it's a bit on the expensive side for yourself, there are other cheaper alternatives that offer good quality. Either way, I'd recommend the P67 chipset for anyone planning an Intel build for a gaming PC.
An SSD is a sound idea but their price per GB is still very expensive right now. To combat this, a few manufacturers have started to release go betweens that will allow for flash caching using traditional HDDs. As far as actual HDD storage goes, I feel 1TB internally should be enough. If you're concerned about contingency, double this to 2gb in a standard raid 1 setup. Personally I think the best solution for music, video and document storage is an external HDD or NAS as it allows for portability and speeds up the backup/repair process as it allows you to keep all your important data in an 'off-site' location.
Unless you plan to get every ounce of power out of your system (or you wanna be that guy) there's no great reason to go watercooled. Most aftermarket active cooling solutions are more than adequate for your everyday gamer. I would not recommend sticking with stock cooling for long if you plan on doing any serious amount of gaming. Stock coolers are designed for the everyman browsing the web, etc infrequently over the course of a couple of years, they're not designed to keep a gaming system healthy over the course of several years.
Finally, soundcards should only be a consideration, really, if you consider yourself an audiophile (or you've grown a hate for the likes of realtek over the years). Most quality motherboards come with decent onboard sound (or a decent PCI soundcard) that only connoissuers will scoff at. However, if you're like me, you'll want to link up as much to your system as possible and an aftermarket soundcard coupled with a front/rear panel that allows for multiple connections (TOSLINK, SPDIF, MIDI, etc) can be invaluable.
P.S. Don't go any smaller than a full tower if you plan on a serious system. Though they may appear too big and bulky, you'll be glad of the extra ventilation they provide as well as the extra room you have to work with.
Best of luck on the build whatever your choices, you couldn't pick a better time to go for it.