Tonybruce,
After reading this thread through again, I thought I should make some points:
1) There is always a bottleneck in a system. For games, it's mainly the CPU or Graphics card.
2) An older CPU like you have now would bottleneck most gaming video cards, so you'd really need to upgrade it.
3) Next, you'd have to decide on how much to spend on the graphics card. If the CPU could support, say, a GTX560Ti which cost $230 you'd have to decide if that was too much.
4) Games vary in the amount of CPU they use.
5) To restate, if you spend too much on the CPU and not enough on the graphics card you'll be bottlenecked by the graphics card. The reverse is true. A $200 graphics card would be severely bottlenecked by your CPU.
Summary:
The goal of upgrading a system for the intention of gaming starts in general, with the graphics card. We look at gaming benchmarks for games we will play at the quality, resolution and frame rate we would play them at.
We next look for a CPU that's good enough to not be a bottleneck to the graphics card.
We next look for a Power Supply, if the present one is inadequate to handle the upgrade. We look both at overall WATTAGE, but also the AMPS for the graphics card. We want at least 1.25x the rating of the graphics cards. For example, a GTX570 might use 38Amps so I'd maybe recommend a 48Amps or more PSU (Amps on the +12V rail or rails. Often printed right on the side of the PSU.)
Finally, we add up the total cost and decide on one of the following:
1) Yes, it's worth the money to me to upgrade.
2) No, it's too much I'll keep my current system for now.
3) No, I think I'm better off building a new system.