It would be difficult to upgrade your Mac since it's quite an old computer, and you'd benefit a lot from buying a new one. I'm not a mac fan so I don't know how much that's gonna cost (I just know they're way expensive/over priced).
Maybe you should consider Windows 7, my friend (a Mac/PC user in that order) recently installed it on her PC and says it does everything Macs did better than Windows but without any of the annoying Mac traits. I also love Windows 7, it's very sleek.. my point being though that you can get the PC you described for 1/3rd of the price you'd pay for a mac of that spec.
Either way I suggest selling your Mac (or giving it away, or using it as an alternate computer in a different room, etc) and purchasing a new computer.