Sounds like you're right on the borderline. If it were me, I'd up the ram to 1 gig and give D3 a shot. If you're not happy with performance, THEN throw more money at it.
Try the RAM; I tell gamers to use 1GB as the "standard" and it will could give you some performance increase. If you can, I would buy a much faster RAM stick(s) and then you will have those for the future upgrades...
okay guys, you make a lot of sense and i just did some surfing and found a BIOS flash (that i just successfully installed) that will supposedly let me run PC3200 on my mobo. so, i flew over to NewEgg and see that i can pick up a couple of 512MB pc3200 sticks for around $180... it looks like the way to go.