Upgrading existing PC, ~500 budget

[Vodkarn]

Hello Toms Forum,

I want to upgrade my current system, give the pieces I replace to my wife, and give her parts to my kids. My wife and I use our computers mostly for gaming - I currently play a lot of STALKER, Mass Effect 2, Killing Floor, Portal 2, and Bad Company 2. She plays similar games, but her PC can't really handle BC2, for example. I'd like to be able to come out swinging when Deus Ex 3 and BF3 come out. So basically, just a gaming PC.

My kids have an ancient piece of garbage that basically just (barely) runs flash games, so anything is an improvement. She's got a quite old computer, the parts of which are simply 'old' - I can't recall exactly how old, but again pretty much anything would be an improvement (I know she has a 2.3ghz dual core, for example.)

My computer is:
P5Q-Pro
E8400 core 2 duo
4 gigs ddr4-800 RAM
GTX 280 (EVGA) Geforce

So, given my 500 dollar budget, I was thinking either replace the 280 with a geforce 6950 2gb, save the rest and upgrade later, or get a core i5 2500k, ASRock extreme4 P67, and 4 gigs of DDR3-1600 RAM, and keep my 280.

Is either of those a far better choice? Is there another option I could try?

Cheers!

 

[Vodkarn]

Oh, I guess it would also be helpful to know I am willing to overclock, but have never done so.

The major question I have here is what would be a better idea: replace GPU wait for Ivy Bridge/Bulldozer, replace CPU/MBB/RAM and wait for a new GPU to become cheaper, etc.