So this is a:
“what should I upgrade?”
question. Budget will be about 40, tops 50 (if the extra ten means better than a 20% improvement over what the 40 would buy)
I need more CPU performance, the dilemma is this:
I know that the e2180 I have in my pc has a reputation for being highly overclockable. But I can’t do anything with an OEM motherboard. I have seen retail Asus boards for around 40 that should allow me to push this thing to potential.
I know that if I buy a core 2 duo, there is no guesswork, it will perform X amount better, but again not be able to be overclocked.
Thats not a very big budget, and a slightly better processor will do little good, as most likely the only difference will be a slightly higher CPU clock. In order to overclock what you have a nice heat sink and a good motherboard would be nice. I would not invest in it too much as its an old platform an there is a limit to how much you can do with an overclock. You could see if it is possible to crank out a bit more performance with what you have, ie. your current motherboard (if it supports any sort of voltage adjustments). However it won't be much, and you will be limited by your cooling if its stock. Who knows, if you are also using a small PSU you could have not enough power to support a significant overclock.
I would not invest much into it, its better to save up some money and get something new. Or you could get a nice heatsink (maybe a hyper 212 if it supports your socket), and see what you can do with your current setup (although the motherboard will restrict you). You could then reuse the heatsink on a future build. If you really want to upgrade with either a new motherboard or a new processor, then maybe finding the top of the line CPU (compatible with your motherboard) would be cheaper than a new motherboard and heatsink for overclocking.