Just to voice a contrary opinion, an extra 512MB GDDR3 will only make a difference in the really GPU demanding 3d games - neither WoW or Assassin's Creed will benefit significantly from it. Unless you have an urge to start serious gaming I would concentrate on getting the best Home Theater/HDTV card in your budget.
It's always easier spending someone else's cash but I would try to hold out for between $150- $200 which puts in your reach (in increasing order of performance):
ATi HD Radeon's 4670, 4850 and (just - if you get a rebate!) the 4870
nVidia 9800 GTX+ or the GTX 260
In both cases I would go for the best you can afford from these add more than 512MB in if it's in the budget (with the 260 you'll get 896MB anyway!).
Three other things to remember when buying graphics cards:
1) These things are huge! Make sure there is room on your motherboard and inside your case so they don't foul other components, fans, cards or even internal case structure! They'll have one or two large cooling fans blowing warm air at whatever card you have below them in the slots. If your case isn't designed with a card like this in mind you might need to rethink your cooling arrangements.
2) Not all cards with the same chipset will behave the same. To some extent this is reflected in the pricing but one manufacturer will build a GPU chipset onto their card but mess up the rest of the board resulting in poorer perfomance than another. Currently I'd try for an XFX card if you can afford one.
3) You will get the best out of these cards with DirectX 10 and that really means Vista/Windows 7 although there is a hacked version of DX10 for XP it isn't completely reliable but you can use it (unsupported by ATi, nVidia and M$).
