I'm using a 4850 on an E8400 at 1366x768.
Only the top end games, (crysis, farcry 2, Anno 1404), require reduced gfx settings and slight overclocks (card core to 700MHz from 625MHz, CPU to 3.6GHz) to make comfortably playable.
If my 4850 failed today and I had a limited budget, I'd opt for a 5770.
The "midlife" upgrade for this computer, though, is going to be a Q9550 CPU and probably a 5850. Even though that's not enough CPU for that card, I can move the 5850 to the next "full" upgrade box and still have the 4850 for this one to give to my kids or whatever.