Suppose I should really plonk Vista on it and get lots of RAM. I use XP now. Anyway, is Vista Business OK? I'll turn of UAC probably too and patch it as well.
Vista Business is just fine for developing -- It has a few features that Home Premium doesn't (such as being able to remote desktop into Vista Business, or join a domain).
It also lacks some functions (doesn't have as much multimedia apps bundled with it, but do you really need those?)
Vista Ultimate contains pretty much everything, but it's doubtful you'll need it. I run Vista Business 64 bit myself, and so far it's run pretty much everything I've thrown at it, including Blitzmax/mingw/svn/etc.
The only issue I've had with the 64 bit version is that some older programs that do driver-level things aren't compatible (e.g. WS_FTP's explorer integration) but that tends to be fixed in their more recent versions. the advantage of being able to use more than 3GB RAM was definitely worth it for me to switch to the 64 bit version. (Currently using 6GB)
Anyway, since you're using it for developing games you probably want a good monitor as well -- if you're looking at an LCD (I would), you'll find that many of the cheaper ones have worse color representation than the higher end ones. (Most of the cheaper panels are 6 bit + hardware based dithering, which can lead to banding in gradients and dimished visuals. Don't cheap out on the screen.)
You'll probably want widescreen since that's pretty much a given on any new PC, and you'll want to be able to see what things look like for the average user as well.