The standard computer setup usually includes a large monitor. For me, though, I would trade a 21" flat-panel monitor for two 18" flat-panels monitors, and sometimes, the two monitors are actually cheaper.
The Windows desktop does not really scale well with the increased resolution that a single large monitor provides, but the Windows multiple monitor support is very synergistic with development. There are some people at Microsoft who have three or more monitors attached to a single CPU. Here are the benefits I see:
1) Maximizing a window takes up the dimensions of just one monitor.
2) Debugging an application can be done with the debugger in one monitor and the application in the second monitor without requiring window flipping or window sizing. This is especially important for stepping though graphical rendering code.
Serious developers should also keep ample disk space (100s of GB) and memory (at least 1GB), especially if you eventually plan on working with Longhorn and Whidbey. There is no reason not to install the full set of CD software anymore, and if you plan to do any video-editing, you can easily use 30 gigabytes on one video stream while editing.
I also maintain a number of peripherals with my computer
1) A video camera with video-editing software
2) A digital camera
3) A scanner
4) An advanced printer
5) PocketPC PDA/Cellphone
Printers are so cheap now; you should get an advanced one, or an integrated multi-function device, provided the individual functions are of high-quality. (Never underestimate the value of integration; besides, the obvious space and cost savings, the ability of different devices to communicate together is like the difference between a set of networked computers and a set of isolated computers.) Manufacturers have determined selling printers at a low margin will ultimately increases profits because the higher installed base results in greater sales of the high-margin ink package--reminiscent of the razor-blade strategy.
All computers basically come with a DVD-RW. Don't forget memory sticks; floppies don't cut it anymore.
I use a PocketPC PDA-Cellphone because I want to be able to read my mail and scan the Internet. Plus, my calendar, tasks and contacts are all synchronized. The PocketPC is virtually another computer in many ways, replacing the need to lug around my laptop every now and then. I can watch video and play Quake, but the pocket versions of Word and Excel leave much to be desired. Make sure you get a detachable keyboard, if you plan to use the PocketPC very frequently.
The other peripherals are really nice enablers, like scanners and video cameras, allowing you take in information from the outside world and incorporate it into documents and software. With my scanner, I keep all my receipts and documents in virtual form, which are easier to store and search. If you plan to do any video editing, it's time-consuming. If your video is an hour long, it will take you several times as long to edit it, unless you cut a lot of scenes out, because, while editing the video, you are essentially "watching" it every time; a minute long scene will thus be watched multiple times in the course of an editing session. Make sure you get an advanced editor that allows you to watch video at several times the frame rate, so each minute captured only takes say ten seconds.
I do keep a laptop around, but it is only useful if I am traveling.
Why invest so much in a computer? If you work with computers all the time, the money also improves your productivity and "quality of life" and is almost never wasted. I spent a lot of money on my gym, but I haven't got as much utility from it as my hardware.