I almost have the same setup as you. Core2Duo E7500 with 2.93Ghz, 4 GB and Windows 7 32 bit.
Get a Radeon 5570 or 6570 (almost the same performance), AH is maxed out except for 8192 shadows. You can do 4096 with self-shadowing, but then it gets laggy during big fights. 2048 shadows are fine except in really big furballs, and 1024 shadows runs completely smooth 60 FPS in 99.9% of the situations. I turn self-shadowing off so I never go below 55 FPS.
Best part: It's dirt cheap ($50), uses only 40W peak, low profile, plug and play.