OP you have a decent system that will get better if you overclock the crap out of it. That being said it is getting old. I would save money for a complete upgrade rather than put money into an old system that just gets more and more obsolete. Thats my opinion anyway. I have a very similar system but for the last year I have kept upgrades to things I can move to a new build.....GTX460, Windows 7, SSD and my Monitor.
Well, the 64bit OS is going to be an expense either way. He'll need it for the new system anyway.
The real "throwaway" expense here is $40 for more RAM that won't be any use on a future system.