If you are looking to get better gaming performance...there is no question you should upgrade your video card. Either the Ti4200 or the 9500pro are very solid choices.
Although upgrading your memory would help too. But not nearly as much for gaming as a new graphics card. The memory would help with loading times and things of this nature. Not necessarily performance though.
Agreed, video card is your first priority. I would recommend a geforce ti or a radeon 9700, depending on how rich you are. Stay away from the geforce 4 MX series and the Radeon 9000 series (Well, the radeon 9000 Pro isn't too bad, but the non-pro version is bad).
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