Yeah, definitely time for an upgrade.
Its a great time for it too. You can get some killer hardware for half of what you would have spent on high end hardware a few years ago.
I just helped my brother upgrade his system to a Q9400, a very nice Gigabyte P45 board and 4Gb of DDR2-1000. He used a special deal on ebay to get the CPU for around $170, the ram was around $40 and the motherboard was around $115. Using his "old" Thermalright XP-120C we cranked his CPU up to 3.66Ghz (1Ghz overclock) and its barely breaking a sweat. Its a hell of a system for the money. That upgrade probably cost him less than half of what a new i7 system would have cost and in most gaming situations it probably doesn't perform much differently.