Making a gaming machine from this...

[Munkul]

you put your two sticks in the slots of matching colour

 

[Infiniium]

you put your two sticks in the slots of matching colour

Yes the ddr2 slots these days are all paired up for better data transfer rates, a bit like having 2 hard drives in a raid config.
Having a stick of 512mb in your slot3 is useless unless you have another stick of 512mb in slot4.
The 8800GT is a great card for your budget and can be overclocked to perform as good as a 8800gtx using the software tool Rivatuner, you can get it from www.guru3d.com i think. BUT this card will run hot if you do that so make sure your airflow is good. And depending on the manufacturer of the card they might have limited the amount you can overclock, if your not to sure then just leave it at stock speeds, were only talking a few hundred points in 3dmark06 here anyway, you will get better results from pushing your E6600.

The E6600 is a good chip and again can be overclocked, find out from your setup screen (press DEL or F10 on start up) if you can change your FSB (frontside bus) settings or your CPU settings, if you can then slowly increase your FSB in 20MHz steps, save and boot to windows then test a game for stability, keep doing this in 20Mhz steps until either you get your CPU speed to 3GHZ or the system crashes, if it crashes then back it of 20Mhz and thats your last safe operating speed. But tbh with the E6600 you should easily make 3Ghz, i have read that some guys have managed to overclock this chip to 3.6Ghz air cooled, and even more water cooled.

Don't get anything less than PC2-6400 2Gb, but don't bother with the PC2-8500 as your mobo is not up to the job. You will find once you have done all the upgrades the mobo will probably be your bottleneck for any further improvement. But by this time you should be pushing a 10k+ score in 3dmark06 anyway which is plenty good enough to run 98% of todays games in high settings.

Good luck

p.s Go buy crysis it pwns all