Given that a lowly HD3450 eats the 785G for breakfast at gaming - a HD4650 will be a *massive* improvement. It'll allow the OP to run at either higher resolutions or with more image enhancement, and it will also make DX10 gameplay available - the 785G really struggles when trying to render DX10. And while the OP doesn't *currently* play modern games, if they suddenly decide to give something more recent a go it'd probably be worth them having a card that can make a reasonable stab at it. £36 is not exactly a fortune (although I accept it's a reasonable proportion of the OPs budget), and it's a sensible choice, with the other budget components, to create a well balanced system.
Of course, the OP may want to hold off buying the graphics card since ATI are about to bring out the low-end 5-series cards, which may not only be worthy of consideration in their own right, but will inevitably see some prices shift in the last-gen stock... but that's a very different argument to saying that a 4650 won't be much improvement over onboard graphics, which is frankly just ridiculous...