The ones for < $890 are running NetBurst Xeons ... which means, at the youngest, they're nearly 4 1/2 years old.
The one at $890 uses a Xeon 5120 which at least gets you into the Core Xeon era, but you're still looking at a more than 4 year old processor.
If you are going to cheap-out, at least do yourself a favor and buy something low-end-but-new from somewhere like Dell. You can pick up a new PowerEdge T110 from Dell for $400 which comes with a only-released-a-year-ago Xeon X3430 which is going to be about 3 times faster than that Xeon 5120. Plus you're going to have a faster FSB, memory, drives, networking, modern interface to upgrade with, etc.
If you're looking at spending $1k/yr for colocating your server, make it worth it by co-loc-ing a server that's not 5 years old.