Disabling SSAO should give you quite a boost. Lowering shadow quality to High shouldn't hurt too much either.... in fact: you could try using the High preset and compare it. In my opinion there isn't much difference apart from less mist and smoke in certain areas. Personally, I prefer that to disabling SSAO.

Concerning the upgrade... that's quite difficult. In fact, the 5850 is not a bad card. The good price/performance upgrades are Radeon HD6950 and Geforce GTX560Ti. According to the benchmarks they should give you about ~20% better performance.. not quite worth it, imo. Faster cards like Radeon HD 6970 and Geforce GTX 570/580 are expensive, yet.
So, personally, I'd rather play on High / with disabled SSAO than spending a buttload of money. Most games are ported from consoles and therefore will run smoothly on a 5850 in highest settings - the few exceptions don't justify spending the money if you 'don't have tons of $ to spend'.

my 6870 can run the game on about 30fps with everything on high (shadows on high. uber is off, texture memory on medium ... that's it) and it runs and looks great.
i find SSAO too important to be turned off. game looks gorgeous.

I agree I overclock my 570 to 580 specs for the 10% gain(saved $150US) and run everything cept StupidSampling(uber); everythings 60FPS+
I also leave vsync on just to keep the GPU from overworking for nothing.