I'd stretch my pocket and go for a GTX 560, or a GTX 560 Ti. Even better, for less than or equal to $100 you can grab the GTX 660 Ti which is a really good graphics card right now. Don't look at the GTX 550 Ti unless if your budget really limits you.
^ That is the type of memory you should be looking at. Some Corsair Vengeance 8GB(2 x 4GB) CMZ8GX3M2X1600C8B RAM. You will have to upgrade your RAM to this DDR3 type in case if you are wondering. The current RAM you are running should be DDR2 which is incompatible with current standards.
You have to keep in mind that someone may consider an SLI upgrade any time in the future even if they think they won't. It is good to minimize the chances of dealing with parts that can't maintain modularity. In this case, the motherboard you recommended Stavros. I never knew that RAM can interfere with bigger heatsinks k1, good call.
Thanks all for the support! I didn't expect such big help, I appreciate your responses and suggestions.
My budget is about 350-400 USD...
This will be my first time upgrading, or my first build if you will.
As to my earlier inclination I feel like i'm forgetting something... Will I need extra fans? Also a friend suggested water cooling, Is it hard to install? expensive to buy?
AMD is pretty weak on the CPU field at the moment, Bulldozers were a huge letdown and their Phenom X6 processors are not a wise buy. Only AMD CPU worth buying at the moment would be the Phenom II x4 which you can get for the price of i3 processor. It will perform a bit better in tasks where more than 2 cores are being used, while the i3 will outperform it when only 2 cores are used.
If you're using the computer for gaming, you should get an i3, for they're generally better for gaming. The phenom II x4 965 is a very similar choice, again, when it comes to gaming. You can also find some cheaper AMD mobos that are more reliable than the cheap Intel ones. Of course all the money saving in the end is so you can leave more room for the better GPU. 550ti isn't a very good choice considering the 7770 is better, and around the same price. Only computers I've seen with the 550 ti are prebuilt ones. Not saying its a bad card, just not worth the price/performance.