Processor will definitely have a significant impact, both on overall game performance and how efficiently your graphics card is utilized.
To put it in layman's terms, with a slow processor your graphics card will effectively be sitting around twiddling it's virtual thumbs waiting on your processor to feed it.
While Hardware T&L is nice, but it is by no means removes the processor from the equation. The processor can still have a very significant impact on gaming performance.
One other comment, you stated that your considering swapping your GF DDR for a GF2 MX400. I would strongly suggest not making such a purchase, in the vast majority of situations a GF DDR is considerably faster then the GF2 MX400.
Unless your running at very low resolutions, the MX400 is simply way to bandwidth limited and it's more powerful GPU is of little benefit over the GF DDR.
There are very few ituations in which a GF2 MX400 will match up to a GF DDR.
The GF3 Ti200 would be a much better option, though in that case you will become primarily processor limited limited. For you, a GF2 Ti/GF4 MX440/Radeon 7500 would all likely perform comparatively to a GF3 Ti200 as your processor wil definitely be holding the GF3 back from it's full potential.
If your set on getting something of the calibar of the GF3 Ti200 then I might suggest the Radeon 8500 as an alternative. The R8500 tends to be slightly faster then the GF3 with a considerably more advanced feature set in many areas. It's also priced fairly comparably to the GF3 Ti200.
Another option would be to wait for the GF4 Ti4200 which will be faster then the R8500 and GF3 Ti200, and has a 3d feature set comparable to the R8500. Though in other areas it's feature set still slightly behind that of ATi. The GF4 Ti4200 should be released soon at a price point only slightly higher then the R8500/GF3 Ti200.
Either way, if you do choose to get a GF3/Radeon 8500/GF4 I would strongly suggest a processor upgrade as well. Otherwise you'll see little benefit to anything much better then a GF2 Ti level card.