How much ram does system have, 2gig or 4? (have to wonder since its an HP with 32bit vista) If you've only got 2, a quick and easy upgrade would be adding another stick. Assuming you've got a single 2gig stick, upgrading to a good pair of DDR2 2gig could be done along with a quality video card for under $200.
Also, before I get into the video card, what is your PSU rated at? Your going to want at least a 450w for any new card requiring power (and nearly all do these days).
Back to the video card, depends on your preference ATI or NVIDIA. If your looking for something new, the 5770 is around $170 and gives you a good card with access to Direct X 11. Only problem is, by the time DX11 games come out your rig may not even be able to take advantage of the new DX11 settings/features. Will run on a 450w PSU (supposedly).
The 4890 is also a good choice, costs around 200 (more/less depending on brand). Its a really solid card, 256bit interface vs 128bit on the 5770. No DX11 though and it'll probably need a 500w power supply just to work.
You want NVIDIA? Wait until the 300 series of cards come out soon, you'll get major discounts on all of the 200 (current) series cards.