buy a gfx card that supports dx11 preferably something better than a gtx 240. you may well need a new psu to power it but if you have 400w with 28-32 amps you wont need a replacement.
you could also try an ati card of similar performance as they tend to require less power to run.
you may also want to get 2 more gigs of ram as 2 gigs is enough to play most games but the more ram you have the smoother things will run...
also forget windows 8. i know yours isnt legit because your pc is so old and only just supports it so go back to xp or 7 it will give you the performance you need to play games without chewing up ram. currently even windows 7 is a bit of a stretch for the ram you have. you really do need more than 2 gig. the bare minimum would be 2.5 gig because win 7 takes 900mb to 1.3gig just to run the o.s win 8 takes slightly less but is suffering compatibility issues atm.
b4 you buy more ram make sure you can buy exactly the same ram as you already have. its not ok to mix and match ram as doing so will stress the memory managment unit, the ram and the cpu to the point where something may break.
so make sure its the same make , model, speed and latency.
hard drives are your last upgrade that will make a difference. adding faster 7200rpm drives in a raid 0 config will speed up data access for everything. games as well as the o.s the only stipulation is the harddrives are of the same speed, same cache size and preferably but not necessarily the same make and model.