Hello and welcome to the forums
Yes in most games your CPU definitely holds your GPU back,upgrading to a quad core(like Q9550 if you want to keep your motherboard) will give you a decent boost in performance
at 1080p the 6850 is really a bare minimum. Sure some games run better with a faster CPU, but getting the 6850 for that res is a wise choice regardless what cpu you have. I would even spend some extra on a 6870 for that resolution. You can overclock the snot out of e7400's with a good cooler, so i would do that before upgrading the cpu.
Actually,the CPU limits the performance especially in games that benefit from a quad core CPU such as most RTS games or titles like GTA IV etc. So OC'ng the CPU or getting a quad core CPU will definitely help