Your Phenom II should be fine, but the GPU is killing you. A Nvidia 430 was able to play this game when my ati 5830 went down, but for about 120 you could get a Nvidia 550 and pickup some extra cores. Or if you want to go ATI, then something with at least 400 stream processors is probably a minium, but again for about $90-120 you probably can find a card with 800 stream processors (like a 5770 or 6770).
I am able to play this just fine with my HTPC running a Phenom II x3 Overclocked to 3.4 and the Nividia 430 on using a custom config with a mix of Low and medium settings and bloom turned off.