The motherboard only relates to RAM, not VRAM. I have used a GDDR4 2600XT in a Socket 939 motherboard, which uses DDR1. Also, yes, a DDR3 card is better than a DDR2 card.
The computer comminicates with video card via gpu bus: AGP, PCI, what ever you mother board uses. The mother board don't have to know what memory, or gpu the video card use. The GPU-bus type is only relevant matter in this case.
If you have very old computer, it can be possible that CPU can become the weakest part of your rig. But most propably it's still GPU where there can be made biggest upcrade in your case if you have enough system memory.
If your power suply can give enough power to your new GPU, you will be fine! Sometimes it happens that new GPU eats so much more energy, that old Power suply can not keep up and there can be soem serious lock downs.
I allso have old socket 939 motherboard like "runswindows95" have with 4GB DDR memory and ATI1800 GPU with GDDR3 memory. Still I think that my CPU could handle easily a little bit faster GPU, so I am waiting ATI 4800 series for my next upgrade. But i have 550W good guality powersuply, so I know that there are reserves for even more power hungry GPU...
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