Your CPU is fine for a low end system.
Adding disk storage is easy if your motherboard has an empty SATA port, and slightly more complicated if it doesn't. Goto wikipedia and find out what a sata port looks like, then open case and see if you have a free one. If so, buy any SATA disk of 2TB or less and buy a SATA cable. You should have an available power connector inside your PC.
Adding 1TB disk space without a free sata port is most easily done by buying a 1.5 TB disk and using the disk manufactures tool to remove the data from your 500GB disk and copy it to the 1.5TB disk. This will leave 1TB or so of free space. Then you just use the 1.5TB disk and put the 500GB drive away as a backup in case something fails. IF you plan to do this post and get better directions. The net is you borrow the sata power and signal cable from your CD/DVD drive and use it to hook up the new disk drive then copy the data from one to the other. You can upgrade disk with our current power supply. Disk will cost less than $100US.
Your power supply is not OK for any gaming. 180W covers your CPU and MB with almost nothing left for video. You will not be able to put any real video card in until you upgrade it. Open your case and look at the wires from your power supply (a rectangle 6 × 3.5 × 5.5 (inches) and in metric 150 mm × 86 mm × 140 mm -- i's the part the electric cord from the wall sticks in). Would you be comfortable replacing the power supply with a more powerful unit? It would require unscrewing a few screws, pulling the wires. IF so a good power supply (called PSU) is less than $100. Get a QUALITY psu, google to find reviews, advice. Don't skimp on the brand. With a good brand, a 350 to 500 watt PSU will run anything you are apt to buy with room to spare for less than $100 US.
Graphics card: read toms article "best graphics card for the money July 2011" to find a great card at your price point They have everything from $50 to $500 cards covered.
Adding more memory is easy. With 32-bit windows you will only see 3.2GB of memory, not 4GB. But memory is so cheap this is not a bad deal. Since your PC has only two dimm slots (Memory sockets: 2 x DDR2 ) you probably will need to discard your current memory and replace with two 2GB dimms. That costs less than $50US. ddr2 pc2-6400 is the fastest memory supported by your MB.
Aside: you can see why some people recommended getting a new PC, with $100 for PSU, $50 for memory, $100 for disk and then your choice of graphics cards the upgrade costs add up.