The memory is used to give colour depth and resolution. Actually, only a bit is needed for quite high resolutions and 32 bit colour.
Manufacturers make a big song and dance about lots of video ram and it IS useful. It is very fast and lets the card work with big textures in games without using the slower system ram. It also lets the card work with big textures when rendering objects, so yes, more memory is useful for you.
CPU and ram also play a big part. Obviously, the more processing cycles you can throw at a render, the faster it will go and the more system ram you have, the less chance of paging to hard disk when the system runs out of ram (it will happen, 3D rendering is VERY system intensive)
There are also dedicated cards optimised for things like autocad but most of these are getting on a bit now.
Bottom line. See if you can find a 3200+ Athlon chip. Then buy another 512 mb of ram and try your system. You will be suprised how lively it becomes. If you still want more, THEN go for something like the Parhelia. Without going 64bit and basically building a new PC that is about as high as you could go. Good Luck.