I would upgrade:
1. power supply
3. hard drive
5. all of the rest (motherboard, cpu, ram, graphics card)
nothing else as you run ddr2 ram and an am2 socket I believe.
Agree with this.
I just complete step 5 myself.
Get a new case and then a new power supply as you can afford it. Then a new monitor and new mouse and keyboard and maybe some better speakers.
Fill up the case with some nice case fans if all slots aren't occupied, I'd get these the same time as the power supply. Next I'd get a new Sata HDD and a sata optical drive if you don't have either already or if your hdd is smaller than 500gb.
For power supplies I recommend a Seasonic or Corsair built unit.
Lastly purchase your Motherboard, memory, CPU, after market cpu heat sink (optional), and video card (sometimes optional) all at the same time. Why? Because for one they usually have 30 day warranties from the people you order them from. Then after that you deal with the manufacturer. And your ram is probably not compatible and depending on what motherboard you get same story with the cpu.
So it goes like this, least it did for me
$350- new speakers and monitor and headphones
$140- new PSU
$140- new OS
$45- case fans
Then it got really expensive
$925- Cpu, cpu heat sink, motherboard, Ram and Graphics card
Hope this helps.