The specs that you listed....are those for the computer you have now, or the computer you want to build?
I'd go with a core 2 duo. The slowest core 2 duo is faster than the fastest P4 processor. Of course, changing your cpu will mean you'll have to get a different mobo.
If you have the money, I'd go with 2gb of ram. It makes a noticable difference IMHO. You could get one stick now to start your build, then get the other stick in the future.
The other thing to keep in mind is to not skimp on your power supply unit. Spend the money on a good one now to avoid problems in the future.
Also, I'm not sure about gateway, but with most (if not all) Dell cases, they are made specifically for Dell, and will usually only take parts from Dell (or parts made for Dell). Certain parts won't fit, like psu's, mobo's etc. A new case is a good idea, and ensure that you've got plenty of ventillation too!
Post back with your specs, or any further questions, and we'll go from there.
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