What Should I Upgrade next

Solution
Get a better CPU, yes. If it is a "CX," make sure it gets plenty of airflow to stay cool. More RAM would be nice too. See how this affects your performance before doing anything else.
At first glance, the first likely candidate for upgrade is your CPU; what you should get would depend in part on your motherboard. For example, you wouldn't need an unlocked CPU if you have a H61 chipset. You might then increase your RAM to 8GB.
That was at first glance. Menetlaus makes a good point though, we need to know what you want to do with this PC. What doesn't run as well as you'd like? You have a decent graphics card, so if something isn't running well, once again I'd suspect the CPU is the weak link.