If you're only planning to spend £60 on the graphics card you're not going to see much improvement for all your trouble.
I'd forget S939 and AM2 and go straight for Core 2 Duo. Get an E4300, a mobo which will allow some overclocking, and some pc2-5300 DDR2 ram. You can run the E4300 at 2.5 ghz using the stock Intel cooler.
You need also to be shopping for an X1950 pro or better graphics card
Maybe a good idea to wait for ATI to launch it's new R600 based cards; you might get a better price for the older stuff then
My problem with your suggestion is my budget. If I wont see much significant gain without going for that sort of solution then perhaps I should stick with what I have and upgrade my AGP card to a X1650 Pro. Grateful for advice on whether this worth it.