Just last week I upgraded my aging PC that had similar specs to yours (same video card - that 9600 pro really was a great piece of technology). Your CPU is newer than mine was though as I was still running an Athlon XP 2600+. I'm also guessing that 210 Megs of ram is a typo and it's actually 2048 or somesuch.
I spent around 350 dollars after mail in rebates for :
2 gigs of OCZ DDR2 Ram (800 MHZ)
Palit Radeon 4850 (512M GDDR3)
Pentium Dual Core E5200 (45 nm)
Gigabtye EP45 D3SL mobo
This should last me another 4-5 years given what I do. And my usage scenario is similar to yours. Other than psx games (or nes and snes) or ff7, I hadn't played a PC game since the original KOTOR so I'm not a huge PC gamer (although the witcher looks interesting to try out - which I now can with my new system!
).
My main drive for change was actually that the fan for my GPU had failed ... a few years ago and that it was emmitting A LOTof heat - litterally warming up my whole place by a big margin when running - and locking up frequently while any kind of stress was put upon it.
New system runs fairly cool since it is a 45nm CPU and 55nm GPU.
Bottom line is, upgrade paths for hardware as old as what I had (and what you have to a lesser extent) is very limited so for a minimally bigger amount of money than upgrading, I've got brand new key components (reused same case, DVD-RW and HDD and like you my HDTV is my screen). For the amount of money I put in, I think that's a pretty good system which should do well with everything I throw at it for the next couple years.
PS : I of course assume your motherboard is not compatible with the newer core 2 since you have an AGP motherboard. Even though its the same socket, the electrical layout is supposedly different.