If the HD4670 or the GT240 is availaible in your market within your budget, then you would be able to game at reasonable levels given your current system (this is consistent with the great advice previously provided by malmental, jyjjy, and KaKkaR0T). Both perform at similar levels and will suit you well.
If these GPUs are not available in your price range, you could step down to the HD4650 (DDR3 version) and still get very good performance for your money. For Nvidia offerings, your might want to consider the GTS 250:http://www.newegg.com/Product/Product.aspx?Item=N82E16814187099
Or, the GT 430:http://www.newegg.com/Product/Product.aspx?Item=N82E16814500176
Really depends on availability in your market. Good luck!