Gaming rig upgrades

Bad PSUs don't cause lag; they usually either cause intermittent restarts, BSODs, or a combination of the two.

To be honest, it'd depend on the game you play, but the 9800GT is underpowered if you want to run games like BFBC2 with the best possible image quality.

If you want a bump up, consider this card. It'd provide a major performance boost and it's the best price vs performance card out there at the moment.

It'd be safer to also upgrade your PSU, since it's barely sufficient. This is a great, inexpensive choice, although I recommend this as a slightly more expensive PSU that provides ample room for any upgrades down the road.
 
We'd need to know which game is lagging, to figure out if it's the video card,
CPU, or the power supply.

A really good 400 watt PSU would run your 9800GT pretty well. That said, with a newer card such as the GT-460 you wouldn't need too much more than a good 400 either. In any case 500 watts would be the max necessary for any video card you could buy on your budget.

You seem to have it in your mind that the PSU is causing the lag. Even if it is, that still doesn't mean you need to bump up to 700 watt or so.

It's Mass Effect 2, well, the demo. It's frame rate issues not lag. Someone corrected me on that.
 
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