Okay, I'm going to shoot down the wannabe technogeeks in this thread and tell you that TV is absolutely fine for gaming. These kids that are saying it won't be are either kids with parents that buy everything for them, or people with enormously wrong priorities in life. And they're all people who are buying into the hype around 1080p.
First off, for a TV that size, you wouldn't notice a difference between one that displays 720p and one that displays 1080p. I guarantee it. At that size of a screen, the difference in resolution is just impossible to actually notice. Actually, 480p is more than acceptable for a TV that size, even. 720p is optimal, and 1080p is overkill and entirely unnecessary.
Second, I have a 32 inch SDTV that I play my games on, and they look fantastic. Granted, I'd love to upgrade to an EDTV (or, if I REALLY had money to blow, an HDTV at 40 inches or more), but that's not economically logical. There are a million things that I should spend that money on instead, so it's pretty much foolish for me to put the money down on something like that. With that said, a 32-inch HDTV will be wonderful.
As for other things, I like the number of inputs that TV has. You've got a lot of choices. That's good. As for your sound, yeah, it doesn't have the greatest sound available, but seriously, no TV's going to be able to put out fantastic sound anyways, and an acceptable stereo system isn't even going to cost that much anyhow. Mine, I paid virtually nothing for, and it's one of the best-sounding systems that anybody I know has (was given most of the speakers (from a couple different people) and the stereo itself, bought the center-channel speakers for like $40). Point is, if you're going for a good entertainment set, you need to remember to get a stereo, because no TV sounds that fantastic anyways.
Your TV is far from the top of the line, but it's still a really good set and most definitely worthy of videogaming. Go for it.