I just unpgraded my trusty Dell XPS 420 (Q6600/2.4Ghz, 4MB RAM, Vista Home Premium 32 Bit, Nvidia 9800GT, 425 Watt non-peak/steady state Dell PS) with:
1) 128 GB Crucial SSD with PC mounting bracket for USD 110
2) NVidia GTX550 Ti w/1GB RAM for USD 130. (The GTX460 is a better unit...but more power hungry, so be careful here)
3) Windows 8 Pro 64Bit upgrade (currently on sale by MS for 39.99...until the end of Jan, 2013). I set up a dual boot. Note even with the upgrade software (ISO file & key) downloaded from MS onto a DVD, I could still do a clean install on the SSD.
Note, I easily customized the Windows 8 to get rid of "metro" and deliver a normal Windows 7 desktop with start menu experience. For the XPS 420 there's no touch UI...so I went old school.
Performance wise the improvement was VERY noticeable. I suspect the biggest improvement was delivered by the SSD.
Considering the age of your unit and the limited PS, suggest a low price upgrade as follows:
1) 64 GB SSD (For OS and program installations). Approx. USD 75
2) Get the Windows 8 64 Bit upgrade while it lasts. Also RAM is cheap now so going to 6 or 8 GB with DDR2/800 can now be fully realized...with 32Bit you remain limited to ~3+ RAM.
3) Upgrade video card for about $130...just make sure your power supply can handle it. Forums should give you a hint. I went with the lower performance GTX550ti for power reasons...even with the 425 Watt Dell unit.
[If you ever want to change to a newer PC (1 - 2 years down the road)...you can certainly re-use the SSD, 64 bit OS, and possibly the GPU...though the GPU would not be cutting edge of course].
Good luck.