If it was me i would just look about for something like i have, it aint by any means the best PC in the world for gaming, far from it, but it will cope with most games i like playing with a pleasing amount of graphical detail while remaining playable, and it will be a lot better than your current machine is.
This PC cost me £35 as it was, and all i added was another 512mb of RAM which i already had, and the GFX card, which i kept from my old machine.
Its not great, but it does the job reasonably well, i still suffer from the t1 drops with LFS if its a busy track, but thats life i guess.
I have a pentium 4, 2.53ghz processor on a medion socket478 motherboard (so you may be able to get a p4 @3.2ghz if you can find one) 1gb RAM, and the same GFX card as you have already got (if it isnt cooked)
It is probably not the most economical way of doing it, as this stuff is still outdated technology nowadays, so for money spent, a new or nearly new PC will be better and more upto daye, and also a lot faster, but if youre on a tight budget and only want to spend a few bucks whilst having something thats reasonably playable, this may well be the way to go.