I'd definately want to upgrade that... but prices will continue to fall when the new processors and video cards come out this fall. You could do a fairly cheap, but decent upgrade right now... I'd go with an AMD setup, cause they pretty much rule the performance per dollar area.
I'd go with somethin like...
Epox 8RDA+ $90 or less
Athlon XP1700 (overclock it to about 2.2-2.4 Ghz) $45 or less
Athlon XP2500 (overclock it to about 2.2 Ghz) about $90
at least 512 MB of RAM... 1 GB would be better... bout $200 for 1 GB of quality PC3200 RAM
Western Digital hard drive, 80, 120, 160, 200 GB depending on your storage needs... anywhere from $80-200 depending on the model you choose
a cheap but good performing video card would be a Ti4200... the Asus V8420S overclocks to the speed of a Ti4600 for about $140
Or you could go with an ATI solution... the 9600 Pro is about $170 I think, and will also overclock very well