I am a big fan of upgrading what you have BUT in this case if you have a 300 dollar budget then I would say do a new build if you can handle building your own or look on craigslist or ebay for used tower with better specs.
with 300 dollars plus selling your tower you would have enough for a nice new AMD Athlon or Phenom X4 setup or look for a used C2Quad setup.
Otherwise look into a new PSU preferably that fits your case.
There is a Toms member here by the name Malmental who is a former Dell Tech and probably could tell you what PSUs would fit. He knows his sh*t.
Plus maybe a Nvidia GT 250 or 285
Plus 2 more gigs of ram.