I don't think you'll have much luck making this a gaming PC with the power supply and CPU.
I would say you would need to update the motherboard, CPU, PSU and then get yourself a graphics card. You will need to also buy new RAM to go with the new board.
It's possible to buy some entry level gaming components at under $400. But you also need to analyze your current computer and make sure standard upgrade components fit. If you bought your PC from a retailer, it may have a case that isn't friendly to upgrading.