Technically Corsair doesn't manufacture their own power supplies (they are made by Seasonic or CWT), but you're right, they are a good choice, and you shouldn't skimp on the power supply.
2 GB of RAM is plenty for Windows XP. If you plan on running Windows Vista or 7, I would move up to 4 GB. Also, you should know that the M4N78-SE board does not support DDR3.
The new Athlon II AM3s are good CPUs if you're on a budget. I'm using the X2 250 right now. The only thing I would change from the original post is improve video card and get a good brand name PSU, something like a 400W Antec, Corsair, or Seasonic. In all honestly 9600GT is enough for LFS, but it is an older card, and there are probably better options for the money.
I disagree. A X2 245 is very power efficient. Also the 4850 has one 6 pin connection so I can't imagine that being a super power hungry video card. That PSU is fine for that system.
I think that motherboard is ancient. It has an nForce 4 and a 6100? You could get that more than 3 years ago! I would personally go with an AM3 board, and DDR3 ram. It will be easier to upgrade in the future if you ever need to. I see no reason to go with old hardware.
As far as LFS is concerned you won't have any problems. LFS isn't a demanding game by today's standards.