Opinions Wanted - What to upgrade on my 3 year old computer?

I was hoping to get some opinions on what components, from my 3 year old pc, I should or could upgrade.

I want to give this machine to my wife, who will use it for internet (VPN into her work), email, downloading pictures (using Photoshop elements) and that's about it. Perhaps we might let one of young kids play the odd simple game on it.

I want to do a clean install of Windows 7 and have it be able to operate video up to 2560x1440 (should I decide to let her have the U2711 instead of me).

Here are the components

CPU: Intel Q6600 2.4GHz 1066FSB 8MB
Mobo: Asus P5K Premium
Memory: Corsair XMS2 TWIN2X2048-6400C4 (2x1GB) DDR2-800 4-4-4-12
GPU: eVGA 8800GTS 640MG
CPU cooler: Zalman CNPS9700NT
Case: Antec P182
PSU: Corsair CMPSU-620HX 620watt
HDD: 2 x Hitachi Deskstar T7K500 500GB in RAID 1
Optical: Pioneer DVR-212D
OS: XP professional

Questions:
-I'm thinking to upgrade to Windows 7, I'll need to upgrade the memory to 4GB. Should I be looking for identical RAM (so 2 more 1GB sticks)?

-Will the memory card squeak out 2560x1440? If not, what would be the bare minimum upgrade to do so?

-Should I replace my hard drives? I'm concerned they might not have much life left in them...

I'm hoping that general opinion will be that my CPU and mobo are still worth this effort.

Please let me know.

Thanks

That video card is fine, no need to change it for that monitor. You should add more RAM, 2 more sticks same RAM. Is this the RAM?

http://www.newegg.com/product/prod [...] 6820145034

It runs at 2.1V so it should be the same voltage.

Simple app to check your HDD:

http://www.softpedia.com/get/Syste [...] alth.shtml

Back up on DVD's whatever is important on your HDDs.