Need help with my new custom system

Hello everybody! Thanks in help in advance. I am new!
So I am in currently looking at making my own first system.

Currently I have:
Mobo: ASUS A8N-E
CPU: AMD Athlon 64 3000+ 1.81gz
RAM: 1 gb DDR
OS: Windows XP

I am looking to make a much better system. This is what I'm looking at upgrading too:

Note: I'm lookin at spending around $250 or so.

So my first question is, should I buy a new motherboard because my current one doesn't support DDR3 RAM? How much better is DDR3 than DDR?
My current motherboard says it is compatible with AMD Phenom II x4 on the box.
The CPU I am wanting to upgrade to doesn't include a heatsink/fan. Any suggestions on a good heatsink and fan for that CPU? 4 cores, it'll be runnin hot !

Finally, I just want to make sure everything is compatible and will work!
Thanks for the help!
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  1. I would check out the scythe szsmc-2000 for $34.99 shipped at newegg. It's not too big. There's plenty of 120mm heatsinks available if you have room for them. For the motherboard, go with the biostar TA880GB micro atx for $59.99 shipped this weekend. It's listed in newegg's 100 deals for under $100 ad this weekend. It has an hdmi port and onboard video for backup, in case your video card dies. It may be listed in email promos only. I've been on their email list for a long time.
  2. Your current mobo is socket 939, can't take any Phenom. If you change your stuff get something better:

    ASRock 880GXH/USB3
    AMD Athlon II X4 640
    Mushkin Enhanced Silverline 4GB (2 x 2GB)
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