Your system seems OK to me. If it is OK for you, I would keep it, or if you replace it, keep it as well as your new one. Your old one might go a bit better with a bit more ram.
Having had Vista for 4 months I am distinctly underwhelmed. If you get a 26 or 32 LCD TV you should be able to plug into it without any hassle.
I have not bothered with a media centre - if I want to watch DVDs etc, I turn on the TV with my separate DVD recorder/player.