Woooo nelly....
First you need more memory and a video card.
If you upgrade what you have its a waste, you have 2 slots for memory and I bet they each have 256. You need a minimum 1 gig (2 is ideal) so if you buy new memory your old will be wasted.
second you are using onboard graphics so you definately need a video card. Your mobo has a AGP slot (last gen) so buying a video card for last gen is also kind of a waste.
You should be able to build a Brand new comp for about $500. If you dont gut your old one you should be able to sell if for a couple hundred to someone who could really use it. (that is about $300 for a new next gen model)
Now a bunch of new stuff is gonna be happening soon(Vista, DX-10, Conroe) so chill out, do a little research and look for someone to sell ur old comp to and we will help you put together a nice comp..