PCI Express 2.0 compatability with older motherboard

2.0 cards are backward compatible with 1.0 slots.
You would however receive slower speeds.
As it's a 1.0 slot, you're going to get 1.0 speeds.

As far as 1.0 x16 cards, take a look at the Radeon HD 2600PRO.

I'd personally get a 2.0/2.1 card in your situation. If you upgrade in the near future you'd be able to utilize the extra speed then.
In which case, I'd get the ASUS Radeon HD 6670
$90 after MIR. So same price as the 1.0 card...

In general newer version of PCI-E have backward compatibility with older version. but for PCI-E 2.1 card they have a bit of problem with PCI-E ver 1.x. some the problem are solved with updating the mobo's BIOS but it depends on mobo manufacturer support. as for bottleneck PCI-E 1.x will not going to bottleneck any single gpu out there unless you going for multi gpu setup or dual gpu card such as GTX590 or HD6990.

AFAIK almost all PCI-E card available today built with PCI- 2.0 or 2.1 spec. so far only ATI 5k and 6k series using PCI-E 2.1. for nvidia i think they will skip PCI-E 2.1 and go straight for PCI-E 3.0 when more mobo makers implement PCI-E 3.0 to their mobo next year (if i'm not mistaken Asrock already have mobo eith PCI-E 3.0)

for less than 100 you can look at this:

http://www.newegg.com/Product/Product.aspx?Item=N82E168...

if you want something better you can look for 5770 but you have to make sure you get the one with PCI-E 2.0 not 2.1