Foe a mid range system a lot of people like the GTX 560Ti from Nvidia and the 6870 from AMD. There are more powerful cards but they would be bottlenecked by your systems older components. You did not list a budget amount to work with so I'm unsure if these fall into your budget.
The GTX 560 is two levels above the card you have now and when upgrading that is what you want to try to do is get two levels above what you have now so that the upgrade will be worth it. So it should be a good fit and not be overly powerful for the other components in your system.
Will the GTX 560 TI be overkill for my system? I don't want to cause to many issues when I upgrade. The system has been running great, but I know for D3 I will need something to hold me over until i build a new system or get a gaming laptop.
We would have to have a little more info on the game to see if it would need more than 1gb of ram on the card. A game like BF3 does want a little more than 1gb to be happy so there would have to be some benchmarks released for us to look at and find out. Depending on the price difference if it's not too big a spread between 1gb and 2gb then to be safe you could go for the 2gb model and be prepared for the possability of it needing the extra. It would be kind of foolish for the game developers to make a game that requires more than 1gb of ram knowing that the majority of video cards come with 1gb.
The extra ram does not come into play with any of the systems functions , the ram on the card is srtickly used by the card for the display monitor. Like say you had a 24" monitor and your video card had 1gb of ram and the card worked fine with that monitor. Then you bought a 30" monitor now your 1gb card will struggle with that monitor and you would be better off with 2gb of ram on the card. That's not to say that your going to buy a 30" monitor because you have 2gb on the card , it's just an example of what the ram on the card is for and it's strickly for the card to use.
I always try to get the video cards with more than 1gb of ram and even if I don't use it I know it's there and in the event I need it I'm not stuck wishing I had gotten the card with more ram. If it's in your price range then absolutly get it and you won't be sorry. Besides who cares if you don't always use it , you have it if you do need it.
Since you have a good power power supply, and you are planning to upgrade the computer, don't worry if the card you get now will be over what your CPU can handle. Just move it to your faster build later, a 560 should be a perfectly good gaming card for several years.