There is no big problem with memory type. If your RAM is DDR2 and GPU is GDDR5 there will be no issue. Better to upgrade your system. If not then upgrade your ram to 4GB, Also you need minimum 400watt supply for even mid-range GPUs, Try to Upgrade Processor and take to 2.8ghz or get Quad-Core.
GPU I will suggest is AMD 6670 2GB DDR3 for current one.
If you upgrade as I mentioned above then GT640 2GB will be better.