I have a:
AMD XP 1800+
Asus A7V266-EX
256DDR 266Mhz (upgrading to 512 next week)
Club3D ATI Radeon 9700 - 128MB AGP (€ 280,- only)
I run all my games 1024*768*32 with 4xAA and 16xAF. Everything runs at least 40FPS up to 120. And in GTA3 I have trailing ON
It's definitely your CPU that's the problem. Basically anything above 1Ghz will run the game just perfectly.. What REALLY makes a good difference is a good motherboard + RAM and a decent videocard.
You want to go for a DDR system with at leat 256MB, and you could get a cheap XP 1500+ for now.. that will last you at LEAST another year. Then when you have more cash just buy a 2.4Ghz or something.. It's pointless getting 'the best' since the price/speed ratio is absurd..
Since you are going to want to upgrade later, you have to make sure your motherboard will be able to handle stuff 4 years from now. I suggest getting one which supports all the latest features like DDR400, UDMA133, FireWire, HighSpeed USB and a CPU of 3Ghz and if possible over... That would last you years!!
Your harddrive is also important, if you are looking into one of those, look for 7200RPM drives with UDMA133 support, since your mobo will support that. Also 8MB of cache on HDD's is VERY good!!!
If you don't have much RAM (256MB is the minimum!) your system will use your HDD as RAM in a swapfile.. If your HDD is slow it will make your system lag badly. Even a 1Ghz+ with crappy HDD and RAM will be slow then..
A good cheap system right now would be:
AMD XP 1500+ € 50?
MSI KT4V, KT400, 333 MHz, DDR400, 8xAGP, Snd, Usb 2.0 € 99,50
256MB DDR400 € 45?
ATI Radeon 9500PRO or higher (leaving nvidia out since they are right now much more expensive compared to quality) € 210 and higher
Maxtor 80 GB, 7200 rpm, 8 MB Cache, UDMA 133 € 125
You will also need a new powersupply then, and possible a case..
Of course, you will need to get a CPU + MOBO + RAM + PowerSupply + CASE then in one go!! That will still be € 250+ You can then save the other upgrades for later.. That's basically what I do, make a list and then buy it slowly..
Wow, I really let myself go on this one.. Hope it helps LOL!