Should I Upgrade My GPU or Switch My Entire PC Setup for 1080p Gaming?

Honestly, you're going to hit a wall with that i5-6500 since most of the games you want to play are CPU-intensive. An upgrade might not boost FPS significantly. Plus, even at 1080p on lower settings, you're putting too much strain on your CPU, which might negate any benefits from a new GPU. I'd recommend looking into a complete system upgrade if you want to keep up with new titles.

For a quick fix, try to get a GPU like the RTX 3060 or RX 6600. 8GB of VRAM should be fine for now, but future games might push that limit. Just keep in mind that using PCIe 3.0 with high VRAM cards can cause some performance dips if you're not careful. As for going for the i7-7700, I wouldn't, since it limits your upgrade path, and there are better options out there.

You might want to consider upgrading your whole CPU and motherboard while keeping the RAM to stay within your budget. A decent used GPU, like a 3070 or 6700 XT, could give you better performance for modern games. However, your i5-6500 will likely bottleneck any new GPU you get, so a full platform switch could be worth it in the long run.

I'd suggest checking out the RX 6700 XT if you can find a good deal. Just be cautious that your current CPU might bottleneck a lot. If you decide to stick with your i5 for now, consider lowering settings to stretch performance, but ideally, it's better to upgrade the whole setup.