Are these your 537's specs ?
Dell Inspiron 537s-002B
Windows Vista Home Premium SP1 (64-bit); 2.5GHz Intel Pentium Dual Core E5200; 4GB 800MHz DDR2 SDRAM; 32MB (shared) Intel GMA X4500 integrated graphics chip; 640GB 7,200rpm hard drive.
If so, you might want to start from a different base to make a gaming PC.
Staying in the same case you can use a low-profile Radeon 4650 with your 250 watt PSU. That should be a huge improvement, and it's cheap Was: $49.99, Now: $44.99, $24.99 with Rebate, Free Shipping
http://www.newegg.com/Product/Product.aspx?Item=N82E16814150562
If you go to a new case you will also need a new power supply (case plus psu total $50 for junk, $100 for good stuff). Then you will need to do the work to fit the MB and attach the cases' external connectors to your MB. once you succeed you have a MB/cpu combo that will limit your performance enough that there's no point to get a good video card.
Starting instead with a refurbished system like this one HP Pavilion Elite HPE-510t Intel Core i5 2300 2.8GHz 6GB 1TB that will sell for $300 here:
http://www.ubid.com/HP_Pavilion_Elite_HPE-510t_Intel_Core_i5_2300_2.8GHz_6GB_1TB/a603149749.html
or an i3-2100 barebones like this one here GIGABYTE GA-H61M-S2-B3 Core i3 Barebones Kit - GIGABYTE GA-H61M-S2-B3 Motherboard, Intel Core i3-2100 CPU, Patriot 8GB (2x 4GB) DDR3 RAM, Seagate 1TB HDD, 24x DVDRW, DiabloTek Mid-Tower Case, 450W PSU for $300
http://www.tigerdirect.com/applications/SearchTools/item-details.asp?EdpNo=1101361&CatId=5205 gives you a workable starting point.
Also you can get sample builds from the new build forum that will give you other alternatives.