Hard to say where to begin on that kind of budget.
My first instinct would be to find the best graphics card you can afford right now like this one.... http://www.newegg.com/Product/Product.aspx?Item=N82E168...
However, it won't run at full speed since your slot is PCI-e x 16 and the card is 2.0 x 16 and many benchmarks are run using at least a previous generation i5 to achieve 1080p.
I think you really need a new mobo/CPU/RAM/GPU solution and that's going to run closer to 300-400.
You could go with an AMD APU/board combo (CPU with graphics) but the latest ones use DDR3 so you'd have to buy a combo AND new RAM.
I'm hoping someone else adds more to this thread but as far as I'm concerned the first way to boost gaming power is through the GPU, but only works if the rest of your system can work with it.
Well I was Thinking, just keep the gpu I have right now and just by a new 775 motherboard that allows for me to overclock the e4400 and also I overclocked my gpu and I can play some games at high but others like Arma 2 on low
EDIT: My friend has a computer with a low end gpu but a six core amd and he can play Arma 2 on High, so I think either my cpu isnt good or im having internet problems
Your graphics card is to low end for modern games so I suggest a new GPU but you will not get the full benefit of anything much above a 7750 and that doesn't leave enough to do anything with the CPU. I suggest get a 7750 and save the rest of the cash or get a 7850 if can get a 965BE or better + board & RAM later.