I had a GTX 460 (currently a GTX 680), and even with an i5 2500k it had a rough time doing D3 at max settings. Specially when you have a bunch of mobs and some spells flying all over. Obviously swapping your Video card would take most of your budget even to step up to a GTX 560. The MB-CPU suggestion is likely your best route.
I compared CPU's to yours, and your looking at the $300 range to do your motherboard and CPU to get 75%+ increase. (rough numbers guess from AnandTech benchmarks)
I came across this bundle on Newegg.
http://www.newegg.com/Product/ComboD...=Combo.1198424
Here is the kicker, if you buy them separate you can get a free set of decent 8GB of ram, your 4GB isn't lacking size wise, but likely in the speed factor. That will put you in the $325-350 bracket.
At about $430 you should be able to squeeze in this. This will give you an over all boost to Windows and if you only install WoW and D3 on it, you should be ok space wise, using your old hard drive as storage and primary program install point.
http://www.newegg.com/Product/Produc...tem=20-148-528
My only concern would be if replacing your MB will trip the Windows registration, and you will have to call to activate and pray they don't expect you to pay for a new Windows key.