Yeah, as has been said, your video card is pretty old. Plus you said "258 mb ATI x/1300 x/1550 card (current drivers)". The 1300 is an entirely different card from a 1555, so that's a little confusing, but it doesn't matter.
As far as the PSU you will need to actually look at it. On the side is a chart that shows the total watts of the psu along with the amps for each rail (I'll explain that in a moment).
It'll look something like this:
The important parts are the max watts or total power. In the above image it has 700 watts. I'd guess you're gonna be somewhere in the 350-500 watt range.
For picking out a video card, the 12v+ rails are important. In the above picture, there are 4 12v+ rails rated at 18amps a piece, for a rough total of 72 amps. The newer cards generally need at least 26amps of power. So, if you have two 12v+ rails of 12amps a piece you can get most cards, but definitely do some research to determine how much power a card needs beforehand.
And upgrading to a 4870 (which is ATI, btw), while a fantastic card, is probably too big of a step. That's a brand new card and runs for just under $300. I would highly recommend picking up a new card with 512mb vram for newer games. 256mb is just not enough anymore.
Sorry for the long post. Let us know what kind of power you have and we can make some suggestions.
Oh, and far as mouse lag goes, it could be the videocard. Try turning the visual settings down.