If your budget is still $400-$500, then here is what I would suggest:
Prices grabbed from Monarchcomputer.com
MSI RS480M2-IL u-ATX AMD s939 Motherboard $93
AMD Athlon 64 3000+ 512K 90nm Rev. E Venice (939) (Retail Box-w-Fan) $156
Corsair TWINX512-3200C2PT 2x256MB DDR $73
eVGA GeForce 6600GT 128MB DDR3/PCI-E/TV-Out/DVI (Retail Box) $178
TOTAL: $500.00
I believe that would be the most efficient way to squeeze a nice upgrade out of that budget. Think about it, you get AMD's latest CPU socket/revision, a modern chipset with good integrated video(if there is such a thing), decent RAM, and a good vid card that can work with the onboard graphics at the same time. I dare anybody to suggest a better build with that budget.
If you buy the mobo/cpu/ram combo from Monarch, then they give you FarCry and Half Life 2 for free. That's a pretty sweet deal, plus they don't charge extra for putting it all together for you.
Edit: Oops, I just noticed that you said your budget was $300-$400. Oh well, I still stand by my recommendations, but I also suggest that you save a bit more cash to make the upgrade worth it.