Upgrade to windows 7 64 bits and whenever possible get a quad processor , the rest of your system is ok

Myself , i play on a desktop computer intel quad core 2300 mhz , 2 Gb ram , an -->> AGP ATI HD3850 <<-- and windows 7 ,64 on high settings at a resolution of 1650x1080 and without any issues realy except for some lag once in a while when it's too busy .
the win7 64 bits upgrade is most important , secondary your processor , it may be possible to replace your dual processor with a quad.. i would look into that and save some money.