Well, your system is somehow similar to mine.
The best possible upgrades for your system without buying a new rig are :
1. Get an SSD, OCZ Vertex 2 or Crucial C300
2. Get a better GPU for example HD5850
3. Get a good proc fan and the OC your proc a bit let say to 3.0GHz.
Something wrong with your old PSU? If yes, Corsair makes good PSUs. You don't have to worry about that. 650W is more than enough for just 1 HD5850 and the OC.
Take a look at my system for reference.
BTW : you can find better proc fans and SSDs than mine. I upgraded my system about 4 months ago.