The sandpaper part. You just need a smallish piece of sandpaper. Fold it a couple of times so that it sits snug in the ram slot and move it along the slots a couple of times. Sometimes there is rust or grime on the contact points that prevents a good connection. It is only the ram slot, not any thing else on your motherboard that you need to sandpaper.
In your case, yes an upgrade would include motherboard, ram, cpu and maybe psu. If you want a gpu, that too as your board will have a agp slot, which don't get any more. So yes it can be expensive, but can also be less than R1500.00, depending what you use the pc for.
Gaming will off course increase the price dramatically.