Pci-e 1.0 or 2.0?

PCI-E 2.0 is backward compatible with 1.0, so yes.  

Err, I mean you won't have any problems.  

PCIe 2.0 cards are backwards compatible with the PCIe 1.0 buss.
A little more info will help us point you in the right direction.
Your PSU will likely need to be upgraded, but just in case is one of the few 450 watt models that really crank out the amps on the 12 volt rail, let us know:
Complete specs, or at least brand and model of your current PSU.
What is your current GPU?
What resolution is your monitor, and what resolution do you game at?
What games do you play, or plan on buying?
What is your budget for the upgrade?

No

How is that RAM split up i.e. 2x512MB+2x256MB?

The new Radeons are comin' out soon (mid June) and they look pretty sweet for the price. Of course Nvidia will release the GT200 based cards around that time as well, but they'll be crazy expensive.

I think you'll be fine as long as you get a good GPU. With prices on DDR2 so low now you might want to take the plunge and go for 4GB. It's overkill now, but the stuff won't get any cheaper. As someone stated above, you may need a new power supply.

No problem  

im usin the onboard grafic card used to have an FX5200 (AGP) but my previous mother board blew so had to get this one in a hurry so dint really look much at the brands

RAM is frm SIMPLE TECH (1GB and 512mb)
Processor is e6550 @2.33ghz
1X80gb Hard disk Western digital (i think)
1X40gb hard disk (dunno which brand but its old  )
i plan on playin the latest games assassins creed, crysis, supreme commander, etc.
budget is around $300ish
i have a CRT IMB monitor the best resolution it gives me is 1600X1200 (17 inch
my power supply is some random company of 450watts (will upgrade as and when necessary)
n i run XP prof

this is all the info i can think off lemme know if u want to know nething else and thanks for ur replies

It's best to run RAM sticks in pairs on motherboards that have dual channel memory controllers such as yours.

Read all about it  

I would get rid of the 512 meg stick of RAM and put in another matching 1 gig so you will be running 2 gigs in dual channel mode.
Get a 8800GTS 512 meg card. These are very fast for the money, and can be had for around $200, depending on rebates and brand name. They will keep pace with the new 9800GTX's for $100 less. They are faster and have better cooling than the now similary priced 8800GT's. I picked up a BFG 8800GTS 512 OC for $200 at Frys a few months ago, and I have been really impressed with it.
A new power supply is most likely needed, and a good investment to run an 8800 series card without problems. You could try first with your old PSU, but I think you may have problems. The minimum specs for an 8800GTS is 425 watts, with 28 amps on the 12 volt rails. If you current PSU does not have cabling for the 6 pin PCIe power connection to the card, get a new PSU that has 500+ watts and is PCIe compliant.