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Again I'll say it. i3/i5 is pointless its a crap platform. If you upgrade you should go to i7. But your budget wont permit upgrading to any of the new sockets. If you want your games to be more playable and within your budget upgrading your mobo is the best way to go. 775 is still a VERY viable platform. Its not on it way out. 775 will be around for 5+ more years before its totally phased out. Its just too solid to get rid of. I personally wont be upgrading to i7 or any new architecture until I'm sure its going to be as reliable and long lasting as 775.  

Alright, have you tried SetFSB? It works on some OEM computers. It is pretty much a overclocking program. If you can get an OK overclock out of your computer you may not have to buy a new CPU at all. I wouldn't spend 185$ or w/e that wolfdale is simply because its an upgrade. Save your money buy a new mobo that supports your CPU plus the one you want to upgrade to. Going the i3/i5 route right now is pointless, they are crap, they don't OC well they are going to be phased out by Q3 2011 and they just don't give a huge increase in performance over 775 to justify the price.
Here is a 775 mobo that should support your current chip and will overclock it.
http://www.newegg.com/Product/Product.aspx?Item=N82E16813128372
 You can run Linux for free or try and get a copy of Windows through MS's student program, or even just buy a new one. You can get W7 new for 99$ on the Egg and you still come in under budget. Buying a new CPU isn't the smart way to go. Buy a mobo overclock your CPU and if you don't get the performance boost you want you can sell your CPU and buy a quad.

Thanks that was tomorrows.

Once Chuck Norris had cancer, due to it his beard had fallen off. So ashamed of not having his manly beard, he put on a black wig and renamed himself Steven Seagal through 1980-2000.

What was going through the minds of all of Chuck Norris' victims before they died? His shoe.

Not a custom any thing, its built into Windows.

It has GODMODE!

http://dl.dropbox.com/u/5939142/WindowshasGODMODE%21.jpg

And yes this is what I do at 3:55 am I find God.