I'm not that familiar with the performance of AMD's older processors, but it seems like your processor and ram are both good. from the looks of your current setup, it seems like any mmo should play relatively well, at least if the settings are relatively mild.
As for an upgrade though, I would say drop it all in video card (this is just the easiest and simplest upgrade). $300 - $500 is a pretty big range and just $300 will get you a really good graphics card. I don't think the processor should be a bottleneck, but that might be considered for an upgrade.
a good graphics card would be an ati 5850 or 5870, although, if you want also upgrade the cpu, then i would say get the 5850 (around $290) and an amd phenom II x4 945 (around $140 and assuming it will work with your MB)