I'm in a similar situation only I'm even more in the Iron Age than you ... XP1700+, KT266A board, 512mb PC2100.
My system is 50% web browser, and 50% home theater (DIVX played thru 9600PRO's TV-out). It does get used for some gaming, but it's MAME arcade emulation, and console emulation like SNES and N64. Nothing the antiquated specs can't handle.
I recently tried to get into Battlefield1942, but the time commitment required was impossible for me. Married, job, 2 kids, and just learned the wife is pregnant ... again. (12 year old boy from wife's first marriage, 18 mo old girl, and new baby coming.)
I love my wife, my kids, my life. But I do wish every single day for three things I no longer have: 1) some real recreation time to spend on my PC, 2) the money to keep it up to date, 3) and a hefty bag full of ganja.
Anyway ....
I'd go for a Socket754 Athlon 64, or nothing. Another upgrade in Socket A wouldn't be money well spent considering you can get a Ath64 2800+ and decent mobo for around $185. The 3000+ will run it to about $200. You can still use your PC2700 for a while and then upgrade it.
Or, do what I'm doing. Suffer on with what you've got, until youre ready to pop on a respectably current Socket939 system.