http://www.anandtech.com/show/6670/dragging-core2duo-into-2013-time-for-an-upgradeNote: your cpu is a quad core, which will help with some games. However, the per-core output isn't as fast as say, an 8400. So good for games that use the cores, but not as good for pure keeping-up-with-the-gpu drivers.
Using an SSD as your system drive is pretty much what you want to do. It will give your comp an overall more responsive feel. Actually, you can read this as 'everything else will feel broken after you start using one'. You can use one for game installs, but the benefits are very specific... aka, loading times become much quicker.
Note that this WILL increase the responsiveness from your games somewhat, simply because having your OS on one drive and your games on another, allows you to access both at the same time. A trick I've been using to great extent for a while now.
If you want greater framerates for your games, a new gpu is the order of the day. Given the age of your system, which can be basically read as 'I tend to keep parts in service for an extra long time', I definitely recommend that whatever purchase you make, you make it with an eye for the future. I recommended a 3GB version of the 660ti to someone else recently, and it would almost certainly be appropriate for you as well... and it falls within your budget range. 3GB is more than most games need at the moment... but 2-4 years down the line, 2GB is going to stop being enough, and start becoming 'budget'.
Also as I recommended the other day, increase your ram to 8GB if you can. The kits are getting pretty cheap, although if you're using DDR2 on your rig you may have trouble finding a good kit at this point. (and also if you ARE using a DDR2 based board, be aware that your ability to carry this ram forward will be limited, so don't spend a fortune here... the other stuff is more important.
http://gamingtrend.com/forums/hardware-software-hell/new-desktop-pc-advice/ (thread from the other day)
Second monitor: If you want it you want it. Money spent here won't make any games go faster though

As for your sata ports... I believe all socket 775 mobo's were limited to sata 3.0Gbs.. which is Sata II spec. Sata III is 6.0Gbs (Ignore this, and buy a Sata III drive, it will last long enough you'll be carrying it forward to a new mobo, barring some accident of fate.
In order.
1: New gpu will give you better framerates on games, and dx10/11 capability.
2: SSD replacement of your system drive will give you overall system responsiveness and superb reliability.
3: More ram/replacement ram, if it can be managed in the budget. Definitely last, 6GB is 'enough', though not extravagant.
http://www.newegg.com/Product/ProductList.aspx?Submit=ENE&N=100007709%20600315498%20600311818%20600286741&IsNodeId=1&name=3GB (any of these would do ya, I lean towards the gigabyte unit for the cooler)
http://www.newegg.com/Product/Product.aspx?Item=N82E16820147193 butt-kicking SSD... many 'editors choice' awards, etc.
http://www.newegg.com/Product/Product.aspx?Item=20-227-916 same here. awards all over the place.
http://www.newegg.com/Product/Product.aspx?Item=N82E16820233398 sleeper butt-kicker ssd. check the reviews.
the trick is to get a good quality ssd... especially if you're getting one for a system drive... the lesser quality/older units tend not to hold up as well due to all the read/write activity.
Atomic
PS: a big chunk of your performance issue with games currently, is the half gig of memory on that 8800gt. Not enough memory means it has to constantly swap textures in and out of memory, from the drive. A new card with at LEAST 2GB on it, and as I mentioned, preferably 3GB, (or more, but that's really not in your budget range), will alleviate that tremendously, not including the sheer speedup of the new gpu hardware.
PS2: I linked the 240/256 GB versions of those drives for a reason. Basically, the next size down is 120/128 GB.. which isn't really enough room left over on the system drive if you end up installing anything else to the SSD. My current box has 209 of 239 GB free on the primary drive, but that's because it literally has almost nothing else installed. Web browser, etc, is about it. If you start piling stuff up on your desktop, downloads folder, etc, it will fill up fast. (if you use a smaller drive)