Yup, that would be a pretty good choice. I'm assuming it's the 7800GS. You could probably go a little higher up the ladder with an X1900 or 7900 AGP video card, assuming you could find one anyway. Buying something new, the 3850, 4650, and 4670 are top choices, but they won't give you too much of an improvement over something like a 1950GT AGP due to your CPU. Such a card also wouldn't be enough of an improvement over the 7800GS in that system to justify the cost. I mean hey, they are offering it to you for $40
Anyway, another thing that system needs is at least another 1GB of memory.