My bike is a Trek Bruiser One (heavy duty hardtail mountain bike), that has been completely redone. I picked up the original bike from a local shop with average components on it for around $400. This was 3 years ago. A buddy of mine is into bikes like we are in to knives, and he offered to redo the whole bike.
It now has Sun Rhyno-Lite wheels, with Tioga City Slickers, Shimano XT drive train, Avid mechanical disc brakes and levers, Shimano XT rapid fire trigger shifters, Shimano BB with the splined shaft, Marzzocchi Dirt Jumper III front fork, and a downhill riser handlebar and stem from Easton.
I have this set up for pavement, and can easily switch it to trail capable by swapping out the tires.
This bike rides like a dream, is easy to handle both on pavement and dirt, and doesn't kill my back.
I had regular V brakes on this at first, but I didn't like the way the bike handled under hard braking, so I bought a disc set up. I originally had a set of hydraulic discs, and didn't like them at all. One of them refused to bleed properly, and the other was always spongy. The cable (mechanical) disc brakes are much better, and if my budget was limited for upgrades, this would be the first.
mwerner has good advice. I picked up the original Bruiser during an August clearance sale at the dealer, and it was marked down $350. A steal deal. Make sure you get a good base model, and then as you have cash, you can upgrade the components.