2GBs isn't bad, but the P4D isn't and the 7300GT is even worse. If your trying to play WotLK it will bring that card to its knees. Upgrading the card isn't a bad idea, but then you have the slow P4 holding it back. I'd look at getting a good PSU, and maybe a 4650 if you can find one cheap. Might keep you going for a bit more.
The video card is your biggest bottleneck... obviously your CPU is one as well, but I think the GPU is worse off than the CPU. If you can only replace one component, replace your GPU... assuming it's a PCI-E card, that will carry over to a new system... if you get a new CPU, well... you'll be limited in your choices because of your motherboard and a new CPU will NOT carry over to a new system.
Yeah, it would be your CPU and video card that are limiting you. The video card would be cheaper and easier to replace. Even a cheap card like the HD4670 should allow you to play at much higher settings than the 7300GT.