Although my home environment has only a single Windows machine (T's desktop), I occasionally get involved in the support of other people's PCs and laptops. Over the time, the list of things that I do on these machines has evolved. This is what I do with new PCs (August 2008 edition :-))
Get a broadband router
I always recommend a router instead of an ADSL modem. This provides the security of a hardware firewall as well as the ability to have multiple machines connecting and wireless access. My preferred model is the Netgear DG834G which fulfills all the requirements. I'm sure there are equally good models out there, but this is cheap and works reliably. It's the model we recommend for our users at work and it's the same model I've deployed to almost all my users.
Operating System choices
Despite the fact that Vista has been given a battering for being resource intensive, with enough memory (2GB minimum), it can do a pretty decent job for the average user. I always make sure the machine can handle Aero Glass (if it can't, then it's too underspec to consider).
I'd like to be able to recommend a Mac or Linux, but for most of my users, it's easier to go the Vista route.
Remove the bloat
The first step is to remove the "value add" software and trial software. First culprit is usually the evil Norton Internet Security. By removing these unasked for applications, and tidying up the URL shortcuts to various ISPs, Ebay etc. can speed the boot time up considerably.
Create a rescue CD
If the machine does not come with OS media or a "Recovery Disc", it is essential to create one. This usually involves the creation of a set of disks that copy the data on a resuce partition to DVD. Keep these safe in case the hard drive dies.
Fix the default IE page
Set it to about:blank and not the advert infested mess that the manufacturer points you to. It's worth doing for those rare times when IE is a necessity.
Although IE7 was an improvement over IE6, Firefox is my favoured browser and one I recommend to all my users. This typically requires the additional download of the Flash plugin afterwards in order to allow access to YouTube etc.
Install some Anti-Virus Software
I used to recommend the free version of AVG, but found recently that Microsoft OneCare is pretty decent for the price. It's fairly unintrusive and can be installed on several machines using the same licence. It's since become my recommended AV solution and the one that I have been installing on my users' machines.
Recommend an external hard drive
I'll always recommend an external hard drive for users to backup their data. People often put so much data onto their machines that it's folly not to have some form of backup. Then it's a matter of configuring the backup to run(!), using either the Vista backup or letting OneCare handle it.
Limited user rights
This can be tricky to deploy and depends largely on the needs of the users, but if possible configure the main login to be a normal, non-administrative user. This can drastically reduce the amount of spyware that gets on the machine. (This doesn't always work as the daughter of one family managed to guess the admin password and escalated herself to an administrator. She then proceeded to download all sorts of malware).
I only do this on a few machines, and always with the consent of the owner. An install of VNC running as a service, and the appropriate firewall forwarding rule has allowed me to manage some machines remotely (mostly family). This often requires the router to be configured to use dyndns.org (which the Netgear does) so I can connect via hostname, even when their ISP uses DHCP.
Although there is nothing here that is rocket science, the result is a nice, quickly booting machine that isn't loaded up with crap and is a nice setup for most users.