Your CPU is here:
http://www.cpubenchmark.net/mid_range_cpus.html
Your score was 1661. My score was 1271.
Since both CPU's have two cores I can make an easier comparion than if it used four.
I did some calculations in the past and figured out than I'd be, on average, bandwidth limited by anything more than an HD4770. in otherwords a better graphics card would provide the same benefit.
I can tell you that World of Warcraft runs really great, possibly at its maximum settings on a 1600x1200 resolution (update: WOW runs close to MAXIMUM settings on an X2-4800+/HD3850/3GB). Other online games don't run nearly as well though they do tend to try to run nicely over a large range of hardware.
There are two choices I see:
1) An AMD4xxx card with the best bang-for-the-buck. Or:
2) A more expensive 5xxx card which provides future DX11 compatibility.
Keep in mind that DX11 won't come in quickly because most people won't have the hardware. When it comes in (like Dirt 2) it will initially add only some enhancements. In fact, unless you have a system that can already run the DX9-only code at maximum quality the power needed for DX11 might be best spent making DX9 look better.
By the time DX11 would make much difference to you, you might:
1) Build a new PC
2) Get a next-gen XBox (Christmas 2011 or 2012)
3) Buy a DX11 card when it is much cheaper (unlikely)
The HD4770 is newer in design than the HD4850; it uses much less power in idle and when performing but isn't quite as fast.
My advice thus is:
1) The HD4770, or
2) The HD5770, or
I hope this information helps you choose. If the extra money isn't a big deal you may wish to buy the HD5770. I suspect most games would be limited by your CPU with the HD4770 and probably all of them would be with the HD5770.
NVidia?
I doubt NVidia's launch on March 26th will change anything. They will have availability problems and I doubt their prices can match ATI's. The launch WILL bring down ATI's price but they'll have to be competitive.
It seems also that the first cards will be at the high-end so I wouldn't even bother. i just thought I'd bring it up.
Hardware video decoding:
You can offload the CPU to the Graphics card by doing this:
1) remove any codec packs or obvious codecs you installed (Control Panel, Add/Remove)
2) Download and install the latest K-Lite Codec Standard Codec Pack from www.free-codecs.com
3) Ensure MPEG2, AVC and VC-1 have DXVA enabled in MPC-HC, the video player
4) monitor your CPU (CTRL-ALT-DEL) with and without it enabled to see the difference (it makes a difference in CPU fan noise too)
Summary:
A video card is all you need. An HD4770 or HD5770 are the best choices. Use VSync. Monitor your game with FRAPs. It's better to have a higher framerate (at least 40FPS then better graphics.).