what's holding is back is your entire machine, truth be told it's not the best for gaming, but I believe you wish a finger to be pointed at something, so in a 25 man raids the biggest problem is CPU. WoW is infinitely CPU limited unless you start getting into post processing at high resolutions and I believe even then it's not that intensive on the GPUs.
So, while your GPU isn't the best by todays standards, your CPU really leaves you hanging in raids. I'm not sure but you might want to look into overclocking if you're not looking to spend a lot. If you're able to spare some money I'd upgrade your mobo+cpu+gpu and PSU if needed.
no man, it's your GPU. your CPU is not the best but more than ok
I was runing WOW on a dual core: Core2Duo @2.4Ghz with a 4830HD video card on 1920X1020 resolution with medium-high graphics. (when i say runing wow i mean 25man hc raids). It was runing with at least 20 FPS even under the most difficult situations, but usually at 30+ (i was disabling shadows during raids cause they were really dragging my FPS down)
and then, my video card broke one day and a friend lend me, guess what card? a 9500GT !! and man was that card slow, i had to turn all my details to low and even resolution to 1300 x 700 something and I was barely able to do 5 mans with a decent FTP
thankfully I bought a GTX 460 shortly (great card btw..i just love it, still) and my FPS went back to normal and I could switch back to my 1080p resolution with high-ultra details
sorry for the long post, but I actually mean is: you need to get a better video card
also, you have 4GB of ram so you should get a 64bit version of windows. (and I recommend windows 7 over vista)
I will be getting windows 7 (its on my erm.. shopping list;)) so that will be sorted soon. I'm not very sure what the deal is with 32 bit and 64 bit, but my dad knows about that kind of stuff so ill ask him (he doesnt know about the gaming capabilites though!)
what gpu will give me decent fps? the gtx 460 (just had a look) is a bit expensive right now, esp if im going 64bit - id rather about the 50-80 range.. but im not sure what will fit in my machine or whether something that price probably isnt worth going for and will be best to save a month or so?
even a Radeon HD 5770/6770/7750 would get you a decent framerate
you should also make sure your power supply can handle the card you might end up buying (the 7750 doesn't even require an extra power connector, so I'm guessing you shouldn't have to worry about your PSU for that one)