What do i need to upgrade next?

[NedLynch]

Check your bios version and then go on the mobo's manufacturer's website and check if your bios version supports the desired processor.
If not check if they have a new bios that will support your new processor.
Update the bios according to the manufacturer's instructions.

I have an Asus mobo and they let you flash the bios from the windows environment after downloading it with their bios updater that came with the mobo cd, more than easy. I would imagine that other manufacturers have similar applications.

The path I would choose for upgrading your system little by little is:
new processor (am3/am2+) socket (that is what you are doing now)
new mobo (am3+ socket, your just purchased processor should fit on that one without any problems) and new ddr3 ram (no way around that for the new mobo)
you then will be even ready to get one of the new FX/Bulldozer processors once they hit the market.

Honestly the video card should be good for a while, I think you did make a good purchase there.