1GB is pretty much the min these days. You dont want less than 1GB for sure, trust me. If you are playing with less than 1gb, well, you are at a disadvantage. 2GB is pretty much the "norm" these days I think. Anything over 2GB is somewhat of a waste, but some people go that route.
Somewhat pointless to have less than 2GB these days since memory is so cheap. At least DDR2 is. I got 2GB of high overclocking memory for $90. Im not sure on DDR memory. I know it cant be that much more.
Id say, if you really want a good rig, get a good dual-core high end Intel or AMD cpu also.
For the video card, I wouldnt have gone with anything less than a 7800GT personally. I guess if youre fine with lower FPS but....seems like youre entire point was asking what would speed up a system. I guess it depends on how many FPS youre fine with. Remember, video card is the most important part of gaming. The CPU and Memory take a backseat in terms of performance benefits. They help, but not nearly as much.