Putting a ~$170 vid card in that machine, while it may help, is not a cost effective solution IMO. I would save up for a cheapo ~$600 gaming desktop (prebuilt that is, if you can build your own that would probably be far better), I think it would be a far better long term investment. It's not cheap by any means, but PC gaming tends to be that way. :/
Your processor (and thus your mobo, probably) and vidcard definitely need to be replaced for what I would consider mid range gaming (SH3 with a ton of higher end mods).
Processor tech has come a ways in the past ~6 years. As a comparison, my 1.5 year old phone has a processor with the same size L2 cache as your desktop, and is built on a 45nm chip (vs 90 for your current processor, smaller is better)

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