You're not going to be gaming with that Intel onboard graphics. You'll need to check for a PCI-E slot and if the power supply is beefy enough to handle a new graphics card.
My money is on the Core 2 Duo chip right now. Fast, runs cool and overclockable if you're into that.
Don't know what $550 translates to in US $'s, but it's not a *bad* PC.