You guys are asking him stuff he probably doesn't know. This is probably an OEM PC, and considering it has a Pentium D in it (power hungry), the options for adding a video card on that PSU will likely be limited.
The way I see it is, you have a few viable options, only two (maybe a third) of which really make sense.
1. Give it a pretty big overhaul, upgrading the power supply (PSU), processor (CPU), memory (RAM), and video card (GPU). Even though it's a major overhaul, it can be done cheap, that is, if you go second hand and know what you're doing. You could drop a Core 2 in there, but it'd have to a 65nm one (no Wolfdale's, which is all I'm seeing on Newegg for Core 2s). You could also double the memory, and get a mid-range PSU and GPU. In other words, don't splurge and keep it moderate, and the cost might make it a worthwhile, if only barely, option. However, this much may be beyond you, and any possible warranties and such will be broken and left crying. Upgrading RAM and adding a video card is easy work, but swapping out a processor and upgrading the power supply is more work, and I wouldn't recommend it to anyone who is just learning their stuff.
2. Add more RAM and be done with it. This may help overall, but maybe not. 1GB is enough for Windows XP, even for some gaming if it's not newer stuff, and you're original dissatisfaction stemmed from not being able to play games more than lack of memory, so even though it would help overall, this would be a pointless upgrade to you. If you're using it for a basic PC, 1GB will be enough.
3. Forget it and/or get a new PC.
Those are the only three that really make any sense. In my opinion, the third option, the forget it part, is the most obvious choice. Adding RAM will possibly help, but not towards your goal, and the first option is probably too far above you to make it worth the while.
So, sorry to say, but I'd first say forget it.
This means it's up to you to decide how willing and committed you are to this. If you're not really committed, then it's not worth it to do more than forget it. If you are, then consider learning more, and then decide between option one, or a new PC entirely, depending on both funds and how much performance you want.
Edit: I guess upgrading the GPU would be possible too, but due to the power supply, you'll be limited, not so much by the fact that "it's a 305 watt PSU", but more because that Pentium D is already taking alot of it, so the maximum you'd be able to get likely wont even be enough higher than what you got to warrant the cost, even if it would be a bit better, so you're back to square one of pretty much forgetting about it.
