Whats the best Graphics card my PC can handle?

As you have a 400watt PSU and a regular PCI-e x16 lane, you can theoretically handle any GPU. However most of the higher end ones will be bottlenecked by the rest of your system, so I'd recomend going with on of the more mid-range chips such as a 5670 or 5750 (for ATi) or a 9600gt or GTS 250 (for Nvidia). All of those cards will take a huge crap all over the 8500gt in terms of performance, and they all have reasonably low energy needs (compared to other cards anyway) so your PSU should be able to handle them.