It costs $786 but I can stretch to around $1000. I don't really understand any of this computer stuff so any help is appreciated.
Well, wherever you're looking, it's definitely not worth looking there. That's expensive. This is what you should be looking at:
http://www.newegg.com/Product/Product.aspx?Item=N82E16883227274
http://www.newegg.com/Product/Product.aspx?Item=N82E16883227288
http://www.newegg.com/Product/Product.aspx?Item=N82E16883227288
http://www.newegg.com/Product/Product.aspx?Item=N82E16883227258
http://www.newegg.com/Product/Product.aspx?Item=N82E16883229206
So i did a qucik search from my favorite finnish webstores, and found the following processor for 150€: Core 2 Duo E7500, 2,93GHz, FSB1066, 3MB and for 174€: Core 2 Quad Q8400, 2.66GHz, 4Mb, FSB 1333MHz. Those would seem to be best LGA775 processors for my pricerange.
On the other hand i also found MSI GeForce GTX 460 Cyclone OC, 768 MB GDDR5, 2xDVI-I/MiniHDMI for 160€ and a Club3D CGNX-X46024 GTX 460 1GB for 179€.
What would give the best performance increase?
I should propably find some performace tester applications to find out the weak spot, according to Windows performance index it's hard drive, followed by CPU and RAM.
You may as well get the Q8400...for games that utilize quads (ie...GTA4 and Bad Company 2), it'll perform better. A little overclock on the chip will make it better than the E7500 even for those applications that don't utilize quads.
Get the 1GB version of the GTX 460.