Here's what I would suggest, first, get a new power supply. Something by Seasonic, XFX, NZXT, Corsair would be fine, but make sure it's around 600W and higher with a single rail and bronze (or higher) efficiency. Then, since you already have a Nvidia card, grab an AMD card with the remaining money. You should have around $300 dollars so grab a 7970 or 7870 depending on sales. The reason I suggest an AMD card is because you can use both of the cards in your system, the AMD for graphics and the NVidia for handling any Physx things. There are various tutorials on how to do this, and its really useful for games like Borderlands 2.
AFAIK PhysX needs a 9xxx or later card, but the point is moot anyway, the 8400 is far too weak for that use.
@ m2300: That PSU needs replacing if it's only 300W. For maximum compatibality you should aim for a unit with at least one 8 pin and one 6 pin PCI-E connectors (dual 8 pin for preference) and 550 to 600 Watts output. Stick to the better names: Corsair, Seasonic, Pc Power and Cooling, OCZ and Antec.
And to play Devils Advocate against Sunius I'll suggest the HD7950, it's less expensive than the GTX670, but of similar performancce so you can get an uprated PSU and still stay under $400.
You may also find this article useful in making a decision:
@ m2300: The rest looks fine to me.
Take your pick of upgrades, the GTX670 has the edge over the HD7950 in some games but the 7950 is somewhat less expensive, either will be a HUGE upgrade from the 8400, though.
Depending on what you play and how much eye candy you want, you could upgrade for good deal less though. Even the humble HD7750 or GTX650 would be a big improvement. Check the chart at the end of my linked article.