I recognize that the following is a question without a simple answer, but I wanted people's take on the matter:

I've been wanting to upgrade components in my build every since I built it. Specs are as follows:

Gigabyte GA-8IK1100 mobo
intel p4 3.2ghz processor
nvidia 5200 ultra 128mb
512mb pc2700 hyperX kingston ram

Ideally, I want to upgrade the video card to either a 6800ultra or a x800xt, and I want to upgrade the ram to at LEAST PC3200, possibly adding more as well. Here's my dillema: I'm not made of money, and I'm hesitant to upgrade with so many big changes on the horizon. Like with the video card, is it worth is to buy a high-end AGP8x card, with PCI-Express clearly the graphic interphase of next generation computers? And with ram, all this talk of DDR2? And don't even get me started on ram frequency. 400mhz is standard NOW, but there's already faster options out there. are they going to be "standard" by the time newegg has mailed me my 400mhz ram? And then "necessary" by the time i've got it installed?

How do other people deal with this problem of the wallet not being able to keep up with advances in technology?

I generally use two criteria to decide wheather or not to upgrade. First is an immediate need. To clarify that, I use a CAD program that back in the days of 486 processors required an upgrade with each new release. I was waiting 45 seconds for each screen refresh. You need to upgrade in order to even install something. Second, if I decide I need to upgrade I will only spend on minor system improvements like increased RAM or storage capacity. Otherwise I will build a totally new system. This new system needs to be at least twice as powerful as the one it is replacing. I NEVER buy the best/fastest, you pay too much premium for the little performance gain. Don't be concerned about the changing hardware technology. Just follow the above rules. One other thing is that I will buy into new vs. older technology if the cost difference is minimal. Like going to SATA drives if you are already replacing a MB. If for present system does most of what you need it to do now, I suggest you wait to upgrade.

You have a decent motherboard/CPU combo...& while your video card isn't great, there are worse. Your weak link is your RAM. Your board supports 800FSB, so you should be running 2 sticks of PC3200 in dual channel mode. Single mode PC2700 is bottlenecking your system.

Asus A7N8X-X
1800+ @8x210mhz
512mb PC3200
Ti4200/8X 128mb
WDC 60GB

I agree with both OtheHill and jam. But, concider in selling your whole system. If you can get a decent price for it, i'd suggest you sell it. Then, use that money and the money you were using to upgrade to buy a whole new system.
Since you're looking at the 6800 Ultra or X800 XT, I assume you're a heavy gamer. Keep also in mind that if you buy a new system which uses PCI-E, currently there arent 6800 Ultra and X800XT cards.
Also, when you decide to buy a new AGP card, 1024MB of memory isn't a luxury.

I know that it's not easy to make a choice between upgrading and buying a new system.
It's indeed pretty hard to with technology.
But keep in mind that new stuff isn't always that good. Check some reviews and look at benchmarks.
You already have a decent motherboard and CPU like jam said, and in my opinion I'd go with the upgrading. You could also later add maybe a SATA disk to increase the speed of your games.

Intel P4 3.2E Ghz
Asus P4P800-E Deluxe
Kingston 2x512MB 400Mhz
Asus AX800 Pro
WD Caviar 160 GB
WD Raptor 37 GB
Creative SB Live! 5.1 Player
Sony DRU-700A
Asus DVD-E616P1