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My question is, is there a big difference between pcie 1.0 and 2.0. If not then I will just upgrade my video card to a 5870, if there is then I may need to go all the way...
there is no difference between PCIe 1.0 and 2.0 at x16 speeds with modern applications, 2.0 does offer more bandwidth but modern applications do not take advantage/need the extra bandwidth so all is well (the graphics adapter itself doesn't determine bandwidth requirements, the data which it must work on does); I don't see this situation changing for a decent while (unless you're gaming at 2560x1600 and intend to keep this graphics card for 4 years or something equally "extreme" in terms of requirements, you should never have an issue (the system's compute power will be an issue before IF bandwidth, basically))
HD 5870 would be a very nice upgrade for your system, both in terms of reducing power consumption and improving gaming performance, and you could throw that 8800GTX into your folding box to boot
Works fine on my budget board from 2007 with pci-e 1. You already have a 775 quad-core, so I don't see much point in upgrading just your mobo to the same dead socket if you want to keep the same cpu.