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:
^^^ seconded i've built rigs where people have bought sparkles for them... 8/8 DOA and only one didn't return, and get a different card. sparkle sent him a new functioning card lasted about 3 months then died and he was stuck with it. the replacment after that is still working to my knowlage btu that was only about a month ago so who knows how long it'll keep going