I used to upgrade these years ago!! Used to by obsolete stock from companies that were upgrading their IT.
I would stick a nice Linux Distro on there; Mint would work well on it.
Upgrading parts is difficult but not impossible - It will probably use DDR2 ram - ebay is your friend there.
You could pick up a cheap SSD drive for more speed. The issue as Tx eludes to is graphics - It's a while since I've played with these old DELLs but i know a lot of the hardware was designed specifically to fit the case so you will need to check the physical space available for graphics upgrades;