The GT 240 is better than that version of the 9600 GSO and yes, you need a card upgrade to play games. The 9400GT is very weak. The GT 240 should be approximately 4 times more powerful for gaming
Overclocking your processor(if your motherboard allows for it) and adding more ram would also help with gaming but the card is your main problem.
Thanks for the replies guys, i will go with the GT 240! Also my motherboard is an ECS PT890T-A. I would not mind trying to overclock it as i plan to build a whole new rig in january, so if it fries i wouldn't care
You don't need to worry about overclocking. Current processors all have safety features that throttle the speed if the temps go over a certain point and if you don't go crazy with the voltage that should never happen anyway.
As for the card have you considered an HD5670 instead? It is over 20% faster and also DX11 while not costing much more(no crazy rebate though.) http://www.newegg.com/Product/Product.aspx?Item=N82E168...