Never buy PC's with intergrated video cards, unless you don't plan on playing video games.
About the upgrade, it is better, but you still won't be able to run the smoothly at a high resolution. As for video card I recommend an ati x850xt or the cheaper x800. I just upgraded from a 256mb x600 se.
My previous card barely ran the game smoothly at 1280 X 1024 on high, with lod mixer and kitserver off. The new card(x850xt) however, can run the game on the highest settings with all the high res mods without a hitch. The only problem is that you have to use a program(ati tool or ati tray tools) to force the graphics card fan to run at a higher speed, or the card will overheat.