It'll be a significant upgrade.
At such a high resolution the GPU tends to be more importaint but you are correct, the E6850 will restrict it somewhat.
So what you do is load up the GPU with eye candy (AA/AF etc) to improve the visuals while still enjoying fairly large improvements in framerates, giving a nice double boost.
Of course, you CAN overclock the CPU
Add a cheap cooler like the Coolermaster Hiper 212+ and it'll run a good deal faster for only a few dollars more.
The 1Gb card isn faster and at that resolution the extra video memory will be a help, so that would be my choice.