OK, mi amigo... Here ya go-
You're processor ain't too bad. It's a P4 at least, and not a Celeron, which is good. You have a 2.53 with a FSB of 533. The best socket 478 CPU with a FSB of 533 you can get is a 2.8.
You're RAM ain't so hot. You posted that you have 126MB. Your mobo only has two slots, and can only handle up to a gig of RAM. Your best bet would be to snag some more RAM. I'd recommend getting two sticks of 512MB if you can. Like these:
Just under $90 on NewEgg (inc. shipping).
As for graphics, you're pretty much screwed. Your mobo doesn't have an AGP slot...which is but one reason we say that Dell sucks. You have old-school PCI slots, so the best you could do is a Radeon 9250 or a Geforce FX5500.
As for buying a decent gaming computer for less than $700, I haven't found one yet. You might be able to build one, but buy one? You wouldn't get much better than what you can upgrade to (except for getting a AMD 64 CPU, of course).