If you don't decide to buy/build a new PC, you sould make sure your current motherboard and/or any other hardware is compatible with a 64 bit OS. (You may have already done this, just putting that in there) As crosshair mentioned, the 775 socket it on its way out the door, but, there are still some very good CPU's that you could upgrade to, depending on your budget.
Now i'm in the same situation you are right now, and with my motherboard, it's still feasible to go the upgrade path rather than buy/build a whole new PC. It really all boils down to your budget and what you're going to be doing with the PC.
For instance: My mom wants me to upgrade her PC so my younger brother can play the games he wants on it. I can get all of the following for under $330 USD. (These aren't the new top of the line technology's, but they're far better than what she currently has, and after shopping around, all that is still cheaper than buying a similar pre-built system.)
2GB PNY DDR2 667 (PC2 5300) RAM
Intel E6500 2.93GHz Dual core CPU
GeForce 220 512MB Video card
160GB WD Caviar HDD
550W Rosewill Power supply