Yeah I do think the graphics card will make the biggest difference as a short-term solution. I've been checking out prices and windows 7 home 64bit seems affordable. The meat of the upgrade would be in the CPU and motherboard like you mentioned. I haven't actually thought of upgrading my RAM but I would assume it is a necessary purchase if I'm thinking of upgrading everything else.
I'm actually at work right now, but tomorrow I will open up my PC and take a few photos to post up so you can see it in a bit more detail
I'm not entirely sure on my power supply and i'll get that confirmed, but I'm fairly sure that will need upgrading as well haha!