I think the Intel Extreme will be built into the motherboard you have and so, yes it's best to update
As for the card, you might not need something as powerful as the x850 XL and might not want to pay the premium for it.
You probably will have an AGP port, though it's best to check as it seems like a rather old board from what your saying, but even new boards have on board graphics.
Try and use Everest which Setishock has posted to find out
We can then help more.
A good graphics card to get if it was AGP would be the Geforce 6600GT if you don't want to pay that much for a graphics card but still want great performance on todays games with high settings.
I wouldn't know what to get if it was a PCI-E card I'm afraid.