Good luck upgrading a Dell. They make it frickin' ridiculous to do so. Mainly, the motherboard. I would recommend replacing the motherboard, because the Dell mobos are the cheapest of the cheap, and go bad quicker than most. But...in all newer/year old or so Dells, they make it next to impossible to replace the mobos. Instead of holes for standoffs, they use "ground clips" on a metal plate. We had to drill our own holes and use a dremel tool to get a new motherboard just put in.
On top of that, the wires for the power/hdd lights/etc. are incompatible with any other motherboard, save Dell. they have 5 wires, all different colors, not color coded at all, all into one mini plug that doesn't fit anything else. rewiring it is a pain. And the USB is like mini IDE cable, it will never fit into normal USB pins and it is impossible to splice it.
personally, i would go ahead and build a new machine. out of all the name-brand PCs, Dells are the biggest pain to upgrade.
But if you want to save on money, you can take the processor out of the dell, maybe the ram (if it is DDR333, PC2700) and even the hard drive if it floats your boat. make sure to find what socket the processor is to match a mobo with it, and make sure that mobo will support the RAM you have. if it is SD-ram, which i doubt, no point to saving it. You can replace the stock heatsink/fan if you so choose to, but really, you have a lot of different options here. It's all a matter of preference.
Sorry to be so long winded.