If you only do light gaming, you don't need to upgrade anything except maybe your video card (which you did not list). Another 2 gig of RAM won't hurt either, but video card first if you don't have a discrete one. Win 7 will run fine on your system.
If your system is adequate for what you do with it, save the money now for when an upgrade is truly necessary, IMO.
Windows 7 alone costs $199, and, until you are determined to play Direct X 11 games, not really necessary until you feel it is. (Online videos are usually bottlenecked by cable modem speeds, not the CPU/RAM or newer OS)