System Requirements for Virtual Machine

Hey everyone, well, I've just recently installed a virtual machine using Sun's VirtualBox on my windows xp home edition. My virtual OS is also the same xp I'm using on the host machine. I'm just running a single application on the Virtual machine, its for a software permission issue. Anyway, I've allocated 256mb RAM and 20gb storage for the virtual machine.

While running the virtual machine, I'm often running an online game that is the perfect amalgam of a 2d-ish 3d game on the Host machine and the slight laggish behavior of the game is not some thing I'm used to and do not like to be used to.

I'm planning to do a system upgrade anyway, which of my specs do you think I need to prioritize to address this problem? I'm sure it's ram, I just need a more expert opinion.

My system is over 7 years old now If i'm not mistaken so go easy on it.
My system specs are:
3ghz Intel Pentium D
1gb RAM
256 mb nvidia geforce 6200
around 90gb more unused hard disk space