Sure it's an upgrade, but it won't cut it for modern gaming. It's like comparing 2mph to 4mph when you want to be going 50mph. Then again you're kind of limited by your old system. If you are going to upgrade your card, then go with a 3650 or 2600XT/Pro AGP card at the least.
The Radeon HD 4650 AGP would be near (if not the actual) pinnacle of performance you can plug into your old system as long as you have a power supply capable of supporting it.
The real question, however, is how much money do you want to spend on this aging system? In all honesty, you may want to live with what you have for now and save your money for a more modern system. PC prices are almost ridiculously low when you consider the performance you can get for your $$$ these days.
If you want a cheap brand name system, you can go to Dell's Outlet (dell.com/outlet) and buy an awful lot of PC for little money and it will be warrantied.
If you want to built your own, establish a budget and run that budget by the collective expertise of Tom's Hardware and the greater geekdom will help you design a true beast for your money.
AGP really is a dated (as in dead) technology that served its purpose well in its day. That really isn't today.
I just want to upgrade my old system for fun! To have a decent computer to play medal of honor from 2001.. Im currently running this system as my main comp
Intel Core i7 920, 6GB DDR3, 300GB VelociRaptor HDD, ATI HD5970 2GB GDDR5 DX11 Graphics
Your main system is truly beastworthy! Now I understand your intent. Verify whether your PSU will meet the requirements of the 4650. If it is good enough, go with it. The 4650 will give you most performance possible for AGP. The change from your current 9800XT to the x1650 will really be negligible. Have fun!!!
Understood on the 300W PSU. What other devices do you have plugged into that particular system (NIC, sounds, etc)? If I were you, I would try the 4650 or 4670 anyway as long as the system isn't full of other cards. You could always dig up a better PSU (I assume the old system uses a standard PSU) for next to nothing.
Back in the day (when AGP was the rage), I remember sticking beefy AGP GPUs into systems that didn't quite meet the PSU requirements and they worked well regardless.
The CPU upgrade is negligible. The GPU upgrade would be quite a step up. Doing both and maxing the RAM would show a marked increase in total, but you have to keep in mind what you are comparing the increase in performance to. As long as you understand the limitations (and I am sure you do), you'll be happy. When you pump up the ol' system, let us know how much better she performs. Good luck!