Until Vista comes out, 1GB of RAM is probably enough for most things. Most performance tests show that's the "sweet spot" for FPS and games because it's the best mix of speed provided by RAM vs. overhead of addressing the memory to use it. If you've got a lot of memory-resident apps you run, then you might want to consider it, but for the "typical user", 1GB is fine until Vista comes out and tests get run on it.
There's a lot of new video cards out there, but not knowing your motherboard it's hard to say what you can and can't take. PCI Express cards are great, but if your board doesn't support them then it doesn't really matter how great they are. To buy another motherboard to support the card...well, again, you're better off waiting for Vista in the February timeframe and just buying a brand new computer from the ground up.
If you're looking at AGP cards, they're still reasonable...the ATI X1600 512 MB AGP card lists for $200, which is not bad at all. Granted, you'll want to do some research into what card meets your needs best, but only you can really figure that out.
For example when I was buying my current machine there was an nVidia 6800GTO and a Radeon X800 XT on the plate. Looking at individual performance tests at places like Tom's Hardware and [H]ardOCP I found out that wihle the nVidia was better at 1024x768, the X800 blew it away at 1600x1200, which is the resolution my monitor runs at natively. Since that's what I wanted things to be at, the ATI card made more sense.
Figure out what you need to do, and THEN find the thing that meets that need, don't go out and buy the biggest number you can find.
