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You could seriously buy a computer with the recommended specs for less than $500.

CPU - $120
2 GB ram - $75
ATI x1950GT - $140
Mobo - $75
HDD - $50
Use the remaining money for a cheap case and rip the peripherals from the pc you have now.

That pc will easily run all games coming out for the next few years (especially if you o/c it). By the time you upgrade, the graphics on the pc will make the ps3 and 360 look like an NES. Plus it's a pc, so you can do fun things like download mp3s and surf for pr0n!

P.S. - The problem with vista and gaming is that the performance isn't up to snuff. It'll probably get there, but until then, I'm sticking with xp.