The board is socket A so the processor you have is probably the best it will take.
You could upgrade the graphics but you would almost certainly have to upgrade the power supply, if it is 360 watts then that would not be enough.
Whether it is worth upgrading really depends on the games you play. You might have noticed the newest games are asking for the likes of 3ghz processor 3.5 ghz recommended so if you are daft on games you might be better getting a barebones and using that click here
In my opinion it depends on what you play. You could get a better graphics card and improve what you already play but you would also need to buy a new power supply. The power supply if you buy a good one you could use on your next PC but the graphics card would have to be an AGP one and if you got a new computer later it would almost certainly be PCI Express.
How much would you have to spend? For a reasonable upgrade to the graphics without going overboard about £70 click here but you would need to buy a new power supply as well.