Re: Upgrading from 9800GTX to ???
Just get a 5850 1GB, no water cooling, probably won't need a new PSU and it will play just about anything out there. It should overclock fairly well and will cost somewhere around 300-320 USD.
Your processor seems fine, maybe do some digging and learn how to overclock it, if you buy a good aftermarket cooler, you should be able to get a decent overclock outta that thing, depending on your MOBO, RAM, PSU, Cooler etc.
Check the Benchmarking and overclocking section here and venture to overclock.net
I wouldn't spend that kinda money on watercooling, for 1000 USD you should be able to build a whole new air cooled quad core rig, and if you're not into monster overclocks, you don't need water cooling at all. I've had it, it has benefits but it is also a pain in the ass.
Phenom II 965BE @ 3.9ghz 200X19.5 1.4625 vcore 2.8ghz NB 2.4ghz HT - Asus M4A79XTD-EVO bios 0604 - 12GB Corsair DDR3 1600 @ 1600mhz CAS 9 w/1T - XFX 6970 2GB 950/1450 - Xigmatek S1283 HSF - Antec 900 - Windows 7 Ultimate x64