It would be up to you what you want to do as far as an upgrade and you would have to come up with a budget amount you want to work with. You would have to determine if the computer has outlived it's usefullness and do you want to go with a new computer. The one you have has ddr2 ram , dual core cpu and 32bit OS. What do you do with your computer , how much do you use it , do you game , these are all questions that determine how far you want to go. As an example for a low end build;
Antec Three Hundred Illusion Black Steel ATX Mid Tower Computer Case $69.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16811129066
Intel Core i3-2125 Sandy Bridge 3.3GHz LGA 1155 65W Dual-Core Desktop Processor Intel HD Graphics 3000 BX80623I32125 $159.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16819115093
Kingston HyperX 4GB (2 x 2GB) 240-Pin DDR3 SDRAM DDR3 1866 Plug n Play Desktop Memory Model KHX1866C11D3P1K2/4G $49.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16820104263
ASRock Z68 Extreme3 Gen3 LGA 1155 Intel Z68 HDMI SATA 6Gb/s USB 3.0 ATX Intel Motherboard $124.99 and a $10 rebate for $114.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16813157271
MSI N550GTX-Ti-M2D1GD5/OC GeForce GTX 550 Ti (Fermi) 1GB 192-bit GDDR5 PCI Express 2.0 x16 HDCP Ready SLI Support Video Card $129.99 and a $20 rebate for $109.99.
http://www.newegg.com/Product/Product.aspx?Item=N82E16814127577
HITACHI HDS721050CLA362 (0F10381) 500GB 7200 RPM 16MB Cache SATA 3.0Gb/s 3.5" Internal Hard Drive -Bare Drive $89.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16822145299
CORSAIR Enthusiast Series TX650 V2 650W ATX12V v2.31/ EPS12V v2.92 80 PLUS BRONZE Certified Active PFC High Performance Power Supply $94.99 and a $10 rebate for $84.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16817139020
This is an example of what you can do for a new computer upgrade , I included a new hdd but you can use the one you have if you want and I also listed 4gb of ram but if you weere to choose to change your OS to the 64bit verion of Windows 7 then you could add an additional 4gb for a total of 8gb. This build with rebates included would be $679.93.
If you are not into building your own you could get somethimg like this allready put together;
http://www.newegg.com/Product/Product.aspx?Item=N82E16883229284
It is currently out of stock but it gives you an example of something you can buy all put together and budget priced. (I just bought this very same one on Cyber Monday for my wife's mother).