You can't use an AM3 CPU with an AM2 board. For a good upgrade path, consider getting an anniversary pentium G3258 and overclock it. This uses the 1150 socket and so can be easily upgraded to a 4690k/4790k later on.
DDR2 RAM will make a noticeable performance difference, though it may not be the bottleneck in this build.
Check craigslist etc for cheap used parts, you can get higher end used parts for cheaper than lower end ones new.
If you're using Craigslist, remember to offer low to begin with - to see how flexible they are and how far you can haggle.
