What should i upgrade?
If your motherboard is bricked, then you will have to buy a new mobo regardless. In order to get the maximum performance, you are going to have to make incremental improvements because you don't have a large enough budget to tackle everything all at once.
To start, I recommend going with a Z87/97 motherboard and pair it with an i5-4670k or i5-4690k. The mobo and CPU alone will cost you $350. @AlwaysFSX 4th Generation i3s do perfectly fine for gaming, his i3 is from 2011. It will be able to run Skyrim, and Far Cry 3, but for highest possible settings, he needs to step up to the i5. By going with a better CPU and motherboard, it lays the foundation for future upgrades. This will be a project, not an instant-fix.
i5-4670k can be purchase for $189 in-store at Microcenter, or using Staples.com price match feature. To use the Staples price match feature, you will have to call them up, or live chat with someone on their website. The i5-4670k for $189 is an incredible deal.
Here is what the first phase of your upgrade path should look like:
EDIT: Added in a good PSU for a low price.
PCPartPicker part list: http://pcpartpicker.com/p/Ffy9t6
Price breakdown by merchant: http://pcpartpicker.com/p/Ffy9t6/by_merchant/
CPU: Intel Core i5-4670K 3.4GHz Quad-Core Processor ($189.99 @ Micro Center)
CPU Cooler: Cooler Master Hyper 212 EVO 82.9 CFM Sleeve Bearing CPU Cooler ($29.98 @ OutletPC)
Motherboard: Gigabyte GA-Z97X-SLI ATX LGA1150 Motherboard ($118.99 @ Amazon)
Power Supply: Corsair Builder 600W 80+ Bronze Certified ATX Power Supply ($39.99 @ Newegg)
Total: $378.95
Prices include shipping, taxes, and discounts when available
Generated by PCPartPicker 2014-06-18 15:46 EDT-0400
Once you have the new CPU, motherboard and PSU, you can use the rest of your components and as you get more money, you can upgrade accordingly.
The next upgrades after CPU and motherboard should be a combination of RAM/SSD. Don't worry about having a 5200rpm HDD, an HDD is going to be slow regardless, no sense spending more money on storage unless it is an SSD.
The next upgrade you will make will be your largest expenditure, the GPU. Nothing has more of an impact on performance than the GPU. Spend as much as you can on this component. I personally think that the best price to performance GPUs out there are either the R9 280 for $200 or the R9 290 for $350. If at all possible, go for the 290 because it will give you much more headroom for future games than the 280. If you cannot afford the 290, the 280 is no slouch and can be overclocked very easily for very cost effective 1080p gaming.
You will also want to consider moving up to 1080p. You can find nice 1080p monitors for $100-$150.

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