I would like at least a 1280 resolution, 2 USB ports, DVD, ethernet, able to plug a mouse in, not too bulky and a decent battery life. To top it all off it has to look good and be reliable. It would also be nice to have more USB ports, wireless, be able to plug a keyboard in and DVD RW but i guess it wouldn't really be budget anymore.
On the other hand it could be a 500 MHz processor, with a 20 GB disk, 128 MB memory and a small screen.
Well, "small screen" and "1280 resolution" don't go together, unless you mean 1280 on an external monitor (but you didn't want to buy a monitor?) and less, say 1024x768, on the internal LCD. If you really need 1280 built-in, it's not going to be small, and it's not going to be cheap.
But if you just need 1280 externally, you can get a used Dell, IBM, or Compaq (for instance) that meet your other specs for $200-350, possibly less -- depends partly on how much "reliablilty" assurance you get. It probably wouldn't have DVD-RW but some models have replaceable drives and can be easily upgraded, or you can use a USB external drive for probably about the same price.
A new machine would be $800+ most places, more for name brands with good warrantees. It'd have about twice the specs you mentioned, and probably a CD-RW/DVD-R at that price. But if you really want 1280, you'll be looking at top-of-the-line models, and maybe $1600-2400. That ought to get you the DVD-RW, 512MB RAM, a processor speed near 2GHz, and 80+GB of hard drive, plus XP. For a machine like that, I personally wouldn't consider anything but a top brand from an established dealer. I would
consider putting a full gig of RAM in such a a machine a good investment.
If you've got USB, then you can of course add a mouse and keyboard. If you specifically want 2 PS/2-type mouse & keyboard connectors, you'll just have to look carefully. Some laptops do, some don't, some have only one.
More than 2 USB connectors is rare for space reasons, but a small external hub fixes that.
Decent battery life is iffy on used machines. If that's important, use some of the money you saved buying used to buy a new battery (usually $100-150). It's also nice to have a spare, even if it's only good for a half-hour or so. Be aware that even some new machines will only have about two hours of useful battery life.
Wireless can be easily and inexpensively added to any machine that otherwise meets your specs, using either USB or Cardbus. In which case, you might not need an Ethernet port; but if you do and it's not built-in, Cardbus ones are quite inexpensive and work well; USB ones are also available, but of course take up more space and may not be as fast. Still probably faster than whatever is on the other end of the connection, though.
A dock or port replicator is very nice to have, especially if you intend to use external mice, keyboards, and/or monitors. If you don't find a laptop offered together with one, at least check that they're available for that specific model of laptop. If it's not built-in to the dock, a second AC adapter makes packing up to travel with the laptop much more convenient.
An alternative is a USB-connected "replicator" that actually has its own printer, network, keyboard, etc. ports. They should work with any machine with USB.
You may find you only need an Ethernet connector when you're docked, in which case you may not have to get one for the laptop itself.
Just why exactly did you want to get a laptop, anyway? Portability, save desk space, like the looks, what? I get 'em 'cause I really do
work with them in my lap. (So I also have to have some sort of tray to keep things cool. I found that my Thinkpad 600E's port replicator works quite well for that, but it about triples the weight...)
If you'll be travelling a lot with the laptop, or otherwise not using an external keyboard and mouse, make sure you like the way the built-in ones work. Something as simple as a nonstandard cursor-key arrangment can be very frustrating.
For pointers, I've used laptops with trackballs, touchpads, and Touchpoint ("eraser") pointing devices, and for most purposes, any will work OK once you're used to it. (In the case of the Touchpoint, this involved building a layer of callus on my right index finger...)
prefer the touchpads, especially if they support "gestures".
Be aware that there's a wide range of quality of sound reproduction with a laptop's built-in speakers, if that's of any concern to you.