I switched to GURPS from AD&D 1st back in 1988 and it remained as my primary system since. GURPS works well as a fantasy roleplaying game. It has extensive character customization and a well designed realistic combat system with several levels of detail. For some this is a powerful appeal over the D&D style. Plus it toolkit nature means you can make a highly customized campaign setting that all hangs together ruleswise.
The trick of course is that SJ Games has chosen to focus on GURPS as a toolkit rather than offer ready made out of the box support. But it doesn't mean there is nothing.
First for character creation GURPS distills the myriad choices into what they call a template. This is a package of skills, advantages, disadvantages, and perks that reflect a role, or profession. For example a Mercenary Fighter, Low-life Burglar, Wizard, etc have templates in GURPS Fantasy.
First the GURPS Book.
For a Fantasy referee the following are useful
GURPS Magic - pretty needed unless you spend a lot of time with the core books to roll your own magic system
GURPS Fantasy - the toolkit Fantasy books combination of rules and advice.
GURPS Banestorm - Implements GURPS Fantasy for Yrth, SJ Games in-house setting. You can ignore the setting and just use the rules which comprises a fair amount of the book. It is a fairly typical Fantasy World beyond it's "twist".
GURPS Thaumatology - Give alternate magic rules and in addition options for GURPS Magic.
GURPS Martial Arts - It about ALL type of fighting both with weapons and hand to hand. It includes material on both western and eastern fighting styles including a few off-beat one not covered much.
Then on e23 there is the GURPS Dungeon Fantasy series. Which implements GURPS for a D&D style game of dungeon crawling. It pretty much pure rules but so far light on monsters. In paritcular I recommend Dungeon Fantasy 1 - Characters and Dungeon Fantasy 2 - Dungeons. As for the rest get what interests you. I have them all and there isn't a dud in the bunch but there are of varying usefulness.
With Dungeon Fantasy you have two styles of Fantasy you can readily play with GURPS without much work. The first is the somewhat realistic 125 pt level of Banestorm/Fantasy, the second is the more D&Dish 250 point level of Dungeon Fantasy. Given that it all GURPS elements of both lines are useful to each other.
There are two free supplements to get for GURPS. Natural Encyclopedia which is the closest thing to a monster manual GURPS has and Historical Folks which is a book of templates of historical occupations which is great for making up NPCs.
There is a lot you can get so for the Budget minded my recommendation is
GURPS Core, Magic, Banestorm, Dungeon Fantasy 1, Dungeon Fantasy 2, plus Historical Folks and Natural Encyclopedia.
Then later pick up Fantasy, Thaumatology, Martial Arts (if you want to go into that level of detail), and the remaining Dungeon Fantasy.
Finally there is GURPS Low Tech which is a technology equipment book from the Stone Age to the end of the Middle Ages. It will come out at the end of the year or very early 2011.
I ran my Majestic Wilderlands with GURPS from 1988 to date. I posted a couple of my campaign notes here if you want to see how GURPS can be adapted to a traditional AD&D style world.
According to "Introduction: Current Cross-References" (GURPS Thaumatology, p. 5), the book is designed to stand alone and doesn't need GURPS Magic. The book presents alternatives to the spell system provided in the Basic Set, as well as some modifications of the default spell system.
If you are using the spell-magic rules from the Basic Set, then GURPS Magic will be relevant (though not needed), but you could easily turf the generic spell system entirely and implement magic in your game world with one of the Thaumatology magic system alternatives.
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Currently the closest thing is the GURPS Natural Encyclopedia. It includes original stats, coverted GURPS 3.0 stats, converted d20 stats, and reference to monsters already published.
Also GURPS Dungeon Fantasy Monsters I has a complete index to all the monster published for the line. It is scattered throughout all dozen books so it is very helpful in see what there.
Finally many of the sentient monsters, orcs, goblins, etc are represented by template from which you build a character.
In my opinion the GURPS line managers have a blind spot to this issue, and the most vocal fans are so used to using the customization features of GURPS they forget how intimidating it looks to newcomers to roleplaying and/or the GURPS game. The situation has been slowly improving over the years.