Gateway DX4200-09 - What do I need to fix?

Hey guys. Before I get started describing my problem, I'll give you my desktop's specs. It's rather old (got it in 2008 I think), so this is why I'm going to be asking the questions that I've got.

Newegg product description:
CPU-Z ID Screenshots:

I've been experiencing noticeable video lag almost constantly. Not necessarily when playing video files saved on my HDD, and I haven't watched and DVD's on this machine (so I don't know about that), but 100% without fail there is noticeable performance drop when dealing with anything Flash. And online, almost everything is Flash/embedded. I'm comparing the performance to that of my laptop, which I got in late 2010 (Fujitsu Lifebook T-730).

I like desktops better than laptops, which is why I use this machine more than my laptop. But it is getting up there in age. Is my Integrated Graphics really that bad? I checked my laptop, and it has over 1gig of VRAM on its graphics, but my desktop only has 256MB. I feel like in this day and age, that is laughable and embarrassing. If I do need to replace/upgrade my desktop's graphics, this is what I was looking at. Would it be compatible with my system? Are there better ones out there for my system?

And lastly, I don't think this is the problem, but I also thought my CPU being so old it may be causing problems. I don't ever remember having problems with this machine back around the time that I got it. It was out of commission due to a faulty PSU for about a year and a half, and I just got it fixed last summer before returning to university last August. Now that it's back up and running, it may be so out of date (because of the ever increasing specs of hardware) that the performance difference between this machine and a modern machine is just too big to ignore.

Should I replace the CPU along with the GPU? Is this rig even worth modernizing? I have 4gig of RAM with two slots still available, so I do have room to expand in that area. I want to keep my same HDD. What do you guys think? Am I better off building a new machine with modern parts, or would I be okay to replace the CPU/GPU of this machine? Do I even need to replace the CPU at all? Is it okay by modern standards? Thanks for reading, looking forward to getting feedback.
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