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Holy crap, the Corsair 1k

You could be powering 10 of those systems
As far as the CPU goes, if you were to upgrade to a GTX 460, you would have a bit of a bottleneck, the GTX 460 would likely be the highest you could go. Unfortunately the E7 series has the small cahce size, which actually has a noticeable difference in many games.
You could however, get a quality Asus or Gigabyte motherboard and try and bump the thing up to 3GHz which I would say, would pair well with just a GTX 460 768MB
Otherwise, here is an upgradethought:
Gigabyte GTX 460 768MB - $179.99 - $20MIR
NCIX Value Bundle Deal AMD Phenom II x4 920 AM2+ CPU & Gigabyte GA-MA78LM-S2H DDR2 Motherboard - $199 - $10 MIR
Total: $378 - $30MIR
The PII x4 920, will give you a slight boost in many games. I would venture a good 10%+, and will pair well with the GTX 460.
Alternatively, I would also suggest looking at the BST section. You could likely get yourself a great deal on an older C2D, something like the E8400/8500 + LGA775 board, which will overclocker beautifully, or even go with a C2Q, like the 9450/9550/9650