Even the most cost effective upgrades of the basic processor nearly equal the cost of a new minimal DOS system. This will likely still leave you with a too-small hard drive and a video system definitely underpowered for Microsoft OS Upgrades and Applications. Even then you will have a computer with some aging components, such as the power supply or floppy drive. Finally, installing a hardware upgrade takes the time and skills of a competent PC technician, at a cost that will more than offset the minimal savings of not having to migrate all the files and peripherals of the old system to the new one. As for old computers going unused, they can often be put to use as print servers, in emergencies, or as spares.
Some manufacturers offer trade-ins for older machines in working order.
In rare cases, replacing the internals of an old 486 to equal a pentium 166 can be cost effective, however this is a very low end pentium, therefore, the upgrade will be short lived.