The model mentioned was intended for business use, and never intended for 1080p movies. If you updated to the graphics card, replaced the hard drive, and increased the RAM (memory) in 2004 to at least 1GB, then you would be able to play movies now.
However, I would be skeptical of any plan to upgrade it in 2011. The computer is seven years old, and due for replacement. At a minimum, you will be paying a premium for compatible parts. It will be very easy to spend more money on this upgrade than the computer is worth.
Rule of Thumb: If the computer needs one upgrade, then consider upgrading. If the computer needs two upgrades, then hesitantly consider upgrading. If the computer needs three or more upgrades, replace the computer.
This model of computer will need (a) new HD, (b) new video card, (c) more/new RAM, and maybe (d) new power supply. REPLACE