Benching your rig against my brother's (which is slightly better than yours)...I'd say it would be playable in a medium setting at around 1280 x 1024. Borderlands is the kind of game that requires 1/4 CPU power and 3/4 GPU power. Looking at your rig, CPU is a PASS and GPU is a NEAR PASS. If you're looking at a 1680x1050, here's a somewhat useful link to compare with:
FYI: ATI drivers has had its share of bugs running Borderlands...though the latest ATI Catalyst drivers as well as game patches should have fixed 'em by now.
That said, even if you wanted to play the game at lower settings, the game would still look good. The cartooney feel of the game still looks amazing at low settings and will NOT affect gameplay at all. STEAM had an amazing special not too long ago which included all DLC for very cheap. I'd wait for a similar deal whether it's on STEAM or other digital download options.
I did buy Borderlands & been playing it w/some success. But while trying different settings, the game is a slight bit jumpy. Some suggest I update my graphics driver & others suggest updating the Catalyst.
What is the difference & which should I update?
BTW: I'm trying to play it at 1280x1024 (my desktop resolution)
Anisotropic Filtering - 4x (what is this?)
Dynamic Shadows - OFF
Bullet Decals - ON
Foilage Quality - LOW (what is this?)
Texture Quality - MEDIUM
Game Detail - MEDIUM
Ambient Occlusion - OFF (what is this?)
Bloom - ON (what is this?)
Depth of Field - ON
Flair Outs - OFF (what is this?)
Anisotropic Filtering: It's a filter that enhances the visual quality of distance object's textures. In details, these filters consider your character's location to all its surrounding objects and help display texture better from the character-to-oject display. You won't notice a dramatic change if your Texture Quality is set at low...but will start noticing better texture (especially far objects) if your texture quality is set at high. The "4x" is the level of detail associated with the filters. The processing power required to run anistropic filtering is quite important. I would troubleshoot with no Anistropic. If you can run Texture Quality: High, only then start raising the anistropic filters. Make sense?
Foliage Quality: Here, they're talking about grass, trees, etc. A low Foliage quality = a low distance draw. In other words, if you set it at LOW, you'll start seeing grass/bushes appear only when you're next to them...whereas if you set it at high, you'll see them from a much farther distance. The processing power required for this feature changes based on the area in the game. You'll notice a slight drop in FPS when in areas with lots of vegetation.
Ambient occlusion is, in my own words, another filter that gives volume to objects. For example, if you look at a hole on a wall...no ambiant occlusion would show the hole drawn as part of the texture on the wall. With ambiant occlusion, you'll feel like there's actually a hole carved out in the wall. Combine this with shadows and you'll see a more 3D feel in objects like rocks, holes in the walls, etc. Just like foliage quality, you'll notice a drop in FPS when in areas with several objects (rocks, etc) using the ambient occlusion filters. Try low settings first and go up as you troubleshoot.
Bloom: is the way lighting is handled in the game. If you turn bloom ON, you'll notice sun rays, lighting overall is different (more pretty). The processing power required for this is fair. For troubleshooting sake, turn to low and raise to see the impact. This is pure GPU processing BTW.
Flair outs: I had to look this up for you. All it is - the planets (seen in the sky) will bloom as oppose to just be part of the sky. If bloom is turned on, there shouldn't a reason why failr outs should be left off.
Your computer is good besides the integrated graphics being used for gaming. Even a small upgrade to a 4550/4650 (which go around for 50$) will increase gaming performance by nearly 4x with settings at medium with large resolutions and high at lower resolutions.