Ah! Here is the problem 
Anyway, if you think you ran into performance and blue screen problems, this might be the reason, Vista is known to have problems with many drivers.
Other than that, the specs of your computer look good. It is better than mine on many things 
EDIT: I intend to make no upgrades for at least more 6 months, probably more.
You don’t need a quadcore to play latest games, the bottleneck 90% of times is the video card. Many games still use only one core anyway.
Another suggestion I’ve been given is to consider to buy a better motherboard, possibly buying a less powerfull processor. The motherboard’s quality is what will make your system stable or not, and a bad motherboard might as well slow down your computer. This could be the problem with your computer. About the processor, well, unless you intend to run Crisys on max on high res, you don’t need it to be too much expensive.
My recommendation for you is to get a good motherboard and a video card, and perhaps some extra memory, but 2Gb will do for a good time. For instance, if I had the money, I would buy a good motherboard from Asus, in my case either a M4A78T-E or a M4A79T, but that won’t work for you because your processor is Intel.
EDIT2:
Not necessarily. It is only if the applications you are running use the four cores, or if you are running many application at a time. In more than half of the situations, 2x3.16 is actually much better than 4x2.66.
EDIT3:
No, not now at least. I have 2gb and Win7 64-bit runs very smoothly. Most times it uses less then 800 Mb. And games are all 32 bit so they won’t use more memory.