Concerning gaming, looking at your system specs another gig of RAM plus a different video card is more of your need. The unwritten rule is 2 gigs of RAM for gaming under XP. But your main issue is your video card. Games are very GPU intensive. What games do you want to play?
You have a decent system. Is your case small or is a mid-tower case? The reason I ask is because some of the newer video cards are large. Also, give us your psu make, model, and wattage.