If you are upgrading because you have really choppy gameplay, a new graphics card will likely do more than a new CPU.
However, MMO's can be rather stressful on the CPU as well. If your gameplay is choppy even on the lowest graphics setting, then the CPU may be limiting you as well.
Do you have a budget to work within, or are you trying to spend as little money as possible, but willing to spend what you need to make your games playable?
A few options:
Upgrade the CPU. If it solves all your problems, then great you are happy.
If it doesn't work with the mobo: Pickup a new Mobo (either one with DDR2 support or buy some RAM as well; both exist).
If it works fine, but your game is still choppy: Pick up a reasonably priced PSU (50-60$) and a decent gaming card (like a 7770 for ~130$).
Or skip the CPU and just upgrade the PSU and GPU. (However, if the CPU still bottlenecks you, and your mobo doesn't support the phenom2, you'll be spending 450$ or so total)
You could go cheaper on the GPU if needed, almost anything will be an improvement. The 7770 will run wow at ultra (or near ultra) I think.
edit: We can help you out with picking parts if you decide to go with something other than the CPU only. Be aware your 300PSU doesn't have much headroom for a discrete graphics card, plan to spend 50$ or so on a decent PSU (don't buy a junk one).
A few PSU links:
http://www.newegg.com/Product/Product.aspx?Item=N82E16817139027 (500w decent quality)
http://www.newegg.com/Product/Product.aspx?Item=N82E16817703034 (400w higher quality)
http://www.newegg.com/Product/Product.aspx?Item=N82E16817703035 (500w higher quality)