It could run pretty much everything except a crossfire set up. Sound Card it's fine, fans your cool, and gfx you shouldn't need to, but you will. They get more energy efficient as the years go on.
Should I use Windows 7 32 bit or 64 bit on the system? I know it can only recognise about 3gb and i'll be installing 4gb. Will programs run on 64 bit windows easily?
Yes indeedy, while I don't use MSN or FireFox, I know they work as I've tested both on my rig. What online games are you looking at playing? All the new ones work with 7 64bit I know that.