Hi mcbig,
I did some part # lookups on what you have provided. They revealed the following:
P/N 6W523
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6W523 Video Card (VGA)
Dimension 8300, Dimension XPS, Dimension XPS Gen2
Radeon 9800 Pro w/TV Out, 128MB, R350,
Dimension, AGP, UHMGA8
P/N J0997
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Sound Blaster Audigy II (Viola) with IEEE 1394,
Audio, PCI, SB0243
So, this XPS is most definately not a Gen 3. It's likely a Dell Dimension XPS Gen 2, but you'd have to be absolutely sure in order to ensure memory upgrade. Videocard upgrade wont matter as we know you have an AGP slot to upgrade.
On the soundcard- I would not upgrade this as an Audigy2 is actually a very, very capable soundcard.
On the videocard- a 9800 Pro is also no slouch, albeit a bit dated today. It's an 8-pipeline card, 256 bit. There are 16-pipeline cards out now. If he's using the stock Dell LCD though, it has a very limited resolution. The biggest complaint with the XPS's is the display truly isn't well matched for the graphics power within.
My best suggestion would be:
Pick up some more memory. If it's a Gen2, get a 1gig kit. I'd recommend nothing but OCZ or Mushkin on an Intel/Dell system as they can be finicky with lower quality/value memory:
OCZ - 2x512 (1 gig) - $112
http://www.newegg.com/Product/Product.asp?Item=N82E16820227031
Mushkin - 2x512 (1 gig) - $119
http://www.newegg.com/Product/Product.asp?Item=N82E16820146393
If you wish to also upgrade graphics, you have a great deal of choices to select from. The only limiting factor would, once again, be the Power Supply. Without the exact model, we could only guess if it's a 275W or 400W+.
As the system already has a decent, 8-pipeline 3D card, upgrades that would yield measurable improvement wont be too cheap. As mentioned above, I'd also recommend either an X800 XT/XL or 6800-series AGP card.
The best deal I've seen running is the AIW X800 XT for $269 after rebate:
http://www.newegg.com/Product/Product.asp?Item=N82E16814102492
It has a TV-Tuner, capture board, video in/out and a 16-pipeline/500mhz core.
The NVidia equivalent is the 6800GT, which is also a 16-pipeline card for $274:
http://www.newegg.com/Product/Product.asp?Item=N82E16814170057
Tom's Hardware has a nice shootout with most 3D/AGP videocards. You can have a look at the various benchmarks and game results here:
http://graphics.tomshardware.com/graphic/20050705/vga-charts-pcie-02.html#3d_mark_2005
Hope this helps!