LE4: upgrade my PC or buy new?

I’m running my Cubase LE4 on a Pentium 4 Dell with 2.8Ghz processor and 512 RAM with XPpro (32bit). It works but the latency could be better, MIDI latency is bad. Hooked up is a Lexicon Lambda audio interface.

Two options: get a new PC in the $500 class (something like a i5 with 6GB and Win7 64bit) or upgrade my existing machine with a faster 250GB (7200rpm) hard drive and 2 (or 4) GB RAM.

Obviously not the same but will there be a significant difference between the two options? What is the impact of Win 7 in this scenario? Better to run XP on a new machine instead of clogging things again with pretty colors and silly “aero” screens and stuff?

Looking for best bang for the buck to significantly increase performance of LE4. Thanks

It looks like a new PC for you, for several reasons. I read somewhere that “older” CPU architecture, like the Pentium 4, is actually not able to process more than 2 GB RAM anyway. Also, any newer RAM will be faster than the 266 MHz or whatever the Pentium 4 runs. As Cubase is designed to spread tasks over several CPU cores, there will be perforamance improvement for you for that reason alone.
As to Win 7: if Win 7 works well for you, then that’s very good. But if Win 7 develops the same “Display driver stopped working and has recovered” error that I have been suffering from (and many others: just search the internet with exactly this error message - and do not believe that anybody has found a solution), then you probably have to go back to XP. Which is what I will be doing now.