Upgrade advise needed

If possible I would overclock the cpu to ~3ghz and get the 4870 or gtx 260. The gtx 280 is better, but so much better it deserves the higher pricetag imo.

I do not think that your video is the problem,rather it is your cpu it is only putting out 2.4 ghz,according to [article here on Tom's] we need at least a 2.6ghz cpu to push any 8800 card and above,at the present I am running an 8800gt/512 ram,,[non oc'd] and it has no problem with whatever I throw at it,,of course the exception for everybody is Crysis,but it dosen't count as it really has no really engaging story,,awesome graphics though,now if only they could get a good story teller,I suggest that ,if you can do your cpu first or overclock it a bit,most of "them thar" core duo's oclock like a banshee,after all the rest of your system is ready to go fast ,,so why not the cpu..
So what it boils down to is this [I offer] either overclock or get a newer cpu and then see what is what,in any event your present cpu is the problem,,it is too slow at it's present speed either oclock it or replace it...
While it is true that your gpu is getting a little long in the tooth ,I think that if you could get a faster say 3ghz cpu in that box [beware of bios updates too],, I think you might see that there is still quite a bit of life in it yet,if you are not happy,,well now you have a cpu that should be able to push almost anything ,,as I said before your system is just waiting for a fast cpu...[don't know what mobo you have tho??.....

The HD4850 is the best bang for the buck and wont be bottlenecked by your cpu.
Your cpu is also very easily overclocked.

Thanks for the advise guys! I think I will try to overclock my CPU first and see what happens.

I have Asus P5W DH Deluxe motherboard. I know there are general overclocking guides but is there anything particular to this motherboard or at least chipset?

How far do you think I can push my CPU to with stock cooling?

Thank you!

Listen to what he is talking about the 8800 is not a bad card and in fact should be able to play pretty much anything out now.