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I did an upgrade just like this for a friend. Bought a nice PCI card on Ebay for a fairly cheap price and also boosted the system RAM as well. That cheapo Compaq computer runs not too bad now and can handle more demanding games.
Adding more system RAM may help it run faster but getting a decent PCI card like a Radeon is what your really need. It's all about the onboard RAM that's built into the card and how much faster it can process it's own data rather than sending it back and forth to your system RAM.
Onboard (hardwired) videocards are cheap by their very nature. They add them in to cut their manufacture costs and to save space, not because it's the best performance choice.
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