I had some time this weekend so I changed the whole system. Enjoy!
The new system is a AMD Athlon 64 4200+ Dual Core CPU Running at 2.2 Ghz, 2 GB RAM and a ATi Radeon HD 5450 Graphics card with 1 GB memory.
I decided to ditch Linux and Openelec for that matter and go back to the bit more user friendly Windows 7 Ultimate x64, the main reason for this decision was so that I could configure the mouse workings in XBMC.
The networking is still the same with the 54Mbps USB Wlan adapter and all the movies are still stored on my 1 Terabyte USB Harddrive.
Since the graphics card has a HDMI output and our TV as well I figured I might as well use it. The audio was a little tricky to set up, but the picture and sound quality is much better than before.
I have also added a wireless mouse so that I can ditch the keyboard and make the system usable from the couch.
Here is a few pictures of the setup (sorry for the bad quality/lighting, I used my sisters camera).
If you want me to post a full instructable, let me know in the comments.
PM me if you have any ideas or if you need help setting up your own system.