HD4850,HD5750 or GTS250 is the max cards I would match with your CPU and yes you would need a new PSU. If your PSU is 300watts you could get HD5670 on run that on it.
Thanks for the reply. PSU is 200w, so I figured any upgrade was gonna require a new PSU. I was wondering, would I lose much using a PCIe X16 2.0 card in a PCIe X16 1.0 slot? Also, those are some large cards not sure if they would fit in my HP case. What do you think of a GT240?