@jarmo
That old box still doesnt need an upgrade to beat the PS3 in any game. As i told you it still runs games in 1080p, while it would be hard to put together 50 games on the PS3 that actually run in 1080p most of them will be PSN titles most AAA games are 720p or below.
I am sure a quad core can be found for that old box if you look around. A core2quad running at 4ghz is no slouch, it would give the first gen I7 a run for its money. Also read the articles on tomshardware most games today are GPU dependant. There was a article which mentioned even a system with a GTX 480 equipped with a 2.4ghz I7 is mostly GPU bound at 1080p.
Even if i dont decide to upgrade the old box, read my example again in 3 years time you already saved 900usd just on the games. Thats enough money to build a rig from scratch, which mostly isnt even needed since you can use many of the parts from the old rig too(casing, hard drives, dvd drive, mouse, keyboard) etc it all helps cutting costs when you do build a new system. regarding the OS you would need one regardless if you made the PC for gaming or not, its pretty much a requirement these days.
PC games drop in price much faster then the console versions. I personally bought BF3 on launch day for 37usd, Batman for 26usd again launch day. Selling your game on console is getting more and more difficult these days with all the online passes, its not just the same anymore.
In regards to old games i can currently play 15 year old games via Dosbox, My collection of games is maybe near a 1000 if i include my entire library. Dont think any other system can dream of such BC.