I would upgrade your video card. Your procesor is fine. (Ram is cheap, so save up for the extra 512)
However, if you are seriously into gaming, I wouldnt buy the 9800. Yea its cheap, and you'll notice an improvement...but for future value you might wanna get a 6800 or x800.
I've gone through 4 video cards in 4 years. Because I've always bought medium value cards. Mind you, I've had my 9600XT for the longest and its a great card, even today. But I'm planning on spending a little extra on my next card, one that's gonna last a while.