Win 7 will probably run seeing you do have a dual-core, although you might want to get more memory for it. 2 GB is barely sufficient for Win 7 in real use. Still, if I was you, I'd rather consider building the computer anew. Knowing the cheaper prices in North America (I assume Canada is no more expensive than the USA, or is it?), you should get a decent modern build with 700 dollars as long as you don't include a new screen or case. The PSU would still be sufficient with 550W but after five years is it running ok? If it is, it'll also save a nice amount for other components.

Get a mobo with USB3, 4GB of DDR3, a quad-core CPU, the Win 7 obviously, and the kind of video card the remaining budget allows. You could also postpone getting a new video card if you absolutely must, seeing how the old is PCI-E. That's my suggestion.