Look, about Dead Island, all i can say it's a well optimized game, i played it with my phenom II 955 and an old Radeon 4650 512mb ddr2 at full details at about 30-35 fps, so playable. If you buy the gtx460, i think it would be bottlenecked by the processor, so it's up to you, but that e5700 isn't meant for gaming at all. All in all, you will get a BIG performance boost from the gt220, also depends on the resolution, but i think the 460 would handle nearly everything maxed.
Also look if your psu would handle it.
A PRETTY BAD 1. your looking at a 50%+ bottleneck. the 460 really does need a quad core to perform well. the biggest card i would recomend for any dual core is a gtx 260 any more than that and games like BFBC3 will only use 50% of the gpu. so you would always struggle to stay above 45fps but spend most of your time in the 15-20 fps club.
Some people have reported decent (not mind blowing) gaming performance with the Pentium Dual-Core E5700 paired with a good gpu using medium detail settings and res settings in the 1440x900 range (30-50fps depending on the game). Basically its going to depend on the game, and what kind of performance versus quality you are looking for. You may have to run things set to medium at moderate resolutions to maintain decent performance, but it would def be ideal to just go with a better cpu for the Geforce 460 if you can afford it, or even better, a 6770 or 6790 and put even more cash into the cpu.