Best upgrade option for $200

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Option 3 is out, because there isn't a significant difference between the two. If you want to see a difference, than you would go for the Q6600, which is out of your budget.

The Western Digital 750GB hard drives I've heard, are comparable to the Raptor's speed, and you get a ton of more space.
Newegg.com - Western Digital Caviar SE16 WD7500AAKS 750GB 7200 RPM 16MB Cache SATA 3.0Gb/s Hard Drive - OEM




More doesn't mean the apps will be faster. And he'd have to get a 64-bit Windows, to handle more than 2GB of RAM.

I was under the impression Windows Vista 32-Bit can support up to 3.2ish gigs of RAM.
 
I'd consider a Q6600, but I've heard that it's not a huge jump from the e6600, since most apps and windows don't take advantage of the other 2 cores - does vista improve on that? Also, would it be smarter to wait for a TRUE quad chip, rather than intels core 2 duo x 2 on one chip? That starts the endless "wait for the next thing around the corner" cycle though.

From what I understand video/audio editing and similar programs (3d studio max and other animation programs) CAN take advantage of the quad cores...but I'm not claiming that as fact. You should probably look into that...plus the q6600 will be more future-proof than the e6600.

It sounds like raid is out, but I only hear good things about it. In what situation WOULD raid be beneficial? Would it really only be worthwhile on a data drive?

It would definitely help with startup and load times for windows and programs (when you boot up the computer or programs themselves) or any other time you are accessing large amounts of data at once (moving a folder of music...etc)
 
if youre into video/audio editing like everyone is saying, you would see a huge difference if you had a q6600.....if you do, just make sure it has g0 stepping, i forget exact model# to ensure its g0 though...
 
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