I reckon you should save up money and upgrade the WHOLE system because it's not just the graphics card that's the problem, it's also your cpu, your ram and probably the whole pc. That pentium D at 2.8ghz is going to very much limit any mid range graphics card out there today, so don't even think about getting a high end one to play new games smoothly. 1gb of ram is also a limiting factor. 2GB is the ABSOLUTE MINIMUM for any kind of modern 3d gaming really, with 4gb becoming mainstream.
So yea think about it, if it was me, I would rather build a whole new capable pc to play new games smoothly. We are talking about a $800 - $1600 build here. I assume if you have a job, this money won't be much of a problem. Good luck deciding.
P.S Back to topic, the best graphics card that you can probably put on that rig is probably a HD 5670, but still I think there will be some bottleneck