Absolutely Rad8500 cards are excellent, esp if you find them as cheap or cheaper than the GF3 cards. I don't believe that image quality is a big concern with DVI because most of it comes down to converting to and from D/A and as such DVI overcomes this anyway, IQ is the big reason so many people go Radeon or GF4. With the Rad9000 cards being better than GF4MX anyway, and Rad8500 being a fair bit cheaper than the GF4TI cards added to which a slower CPU certainly won't benefit much at all from faster gfx cards anyway the Radeons are certainly a great choice.
GF3 cards will have much better AA and higher quality Aniso while Rad8500 cards are slightly faster, have better IQ (but see above), great TVout and dual display (but double check as not all Radeons have this feature). If you get a Radeon do look to get a true ATI (built not powered) as this ensures quality, clock speeds, perf and features ... but if you find a bargain non-ATI card just double check for any differences to the true ATI alternative.
Buying a 128MB gfx card is VERY worth while and it doesn't cost a whole lot more either. Whether you go GF3 or Rad8500 you should be coming in around $100 unless you find a bargain and both are good choices with the Radeon just edging it for me. That leaves you a very generous amount spare for a monitor or to consider upgrading other components too.
Have you thought about upgrading the mobo and CPU if not the RAM to DDR too? AthlonXP1800+ and SktA mobo cost from about $130 while 256MB DDR only adds about $45. If you have PC133 SDR you can take this over to some SktA mobos and some also allow the future addition of DDR as well. If you currently use all PCI cards (although replacements are cheap) and providing your case (airflow and ventilation) and PSU (pref 300W) are up to scratch then this is a VERY worth while and VERY costt effective upgrade and will give you a huge boost in everything your PC does as well as open up a lot of features and easy future upgrade options.