Dude, ur rig is fine. There is just a gig of RAM that is needed. No need of upgrading the entire rig as far as i think. U are not going to get a huge performance boost in general applications anyway. U r anyway upgrading ur graphics card which would be 8800GT(and it's an awesome card).
Let me tell u a few things:
1. If u get anything through KMD, u'll get it cheaper since he imports from the US. And anything imported would not have local warranty i.e no warranty in India. So, if anything goes wrong(which rarely happens but u never know when it nite go boom), u'll have to pay ~1000rupees to KMD for shipping the product back to the US and getting a new one. So, for every RMA, u spend 1000 bucks extra.If u want to get any product cheaper u should get it from KMD.
2. If u get anything in India, the local warranty is dere and u save on any RMA since u don't have to spent a single penny on the RMA process and u get a new one here in India itself. So, if u want to save money on after sales support, get it from here only. There are good dealers in TE from whom u can get every card at really good prices.
3. As per my observation here, graphics cards with local warranty have a higher resale value if u plan to sell than the cards later than the cards which are imported from the US coz a lot of people prefer local warranty.
So, decide which way u want to go...
@KMD, Sorry if the post offends u in any way

It's just my personal opinion