Any site that you preferred to buy this card or you buy it from local store?
With your specs above then go with HD5670 2.0 version, it faster than 8500GT and you should have no problem running that card with your Zebronics 400W PSU.
OC=Over Clocking. Basically raising the multiplier or frequency to get higher speed.
See my specs below? I have E6300 1.8GHz (stock speed) and I OC it to 3.0GHz, that's make my PC faster and I can play most of games with decent setting (maxed out).
OC is one cheap way to increase performance without buy a new components.
As your case, you will be fine with GT240 or HD5670, but if you want higher card then it's okay, but your MUST get a new CPU OR you can OC your current cpu...
Dollar sign after the amount, Zebronics PSU, "odd" name, and a lack of knowing what the abbreviations we use mean equals foreign country. Whats available at this local shop that you plan to buy from thats in your budget? It does us no good to suggest a card that you can't get.