Since the setup for that PC is quite frankly abysmal, you'd be better off using it on extras like a mouse, a keyboard, mouse mat etc, and then save for an upgrade system.
I won't offer advice on the computer budget, since I have no knowledge of the budget parts (looking at Phant to offer advice here). On the peripheral point, would you just want a generic upgrade on what you have (what do you have btw?) or a gaming specialist upgrade?
On that budget, I would highly recommend my current keyboard - the Razer Arctosa. Very comfortable, and very reasonably priced for something that looks awesome. I would also recommend a Razer mouse on similar reasons, but since they are designed around different styles of grip on the mouse itself, it would be difficult to recommend one without knowing your style. To discover which of their products would work best for you, I recommend going through their configuator.
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