I thought I would jump in here too because I am basicly doing the same thing as the OP. I do a little bit of everything with my computer, but Lets face it, even my largest spreadsheets barely slow my current setup now, so the only thing that more power really matters for any more (for me at least) is gaming.
My Specs are very similar,
GeForce 8800 GT 512MB
GIGABYTE GA-P35-DS3R LGA 775
E2160 1.8GHz (slight OC)
SST DDR2-800 2GB (1X2)
I know I'm going to add an extra 2 gig stick to get to that 4gig dual channel which is about the best I can get with my 32bit OS.
I'm at work so I don't remember just what my CPU is running at, but I have it OCed some, but not as much as I was hoping for. I'm on the stock heatsink, could probably do better with a better Heatsink, but at this point I think I'm better off just buying a faster CPU then sinking another $40 in a heatsink.
So, What say you?
It seems that the extra ram for dual channel is a no brainer at $19.50 from eWiz.com.
So do I upgrade to a E8400 Wolfdale, or just get a good heatsink and try for some more juice from my E2160?