Pretty much, yeah. Psychonauts makes use of quite a few special effects which require a recentish card in order to display, and it also generally relies upon a lot of the improved lighting and rendering technology inherent with pixel shader supporting cards. In short, if your card cannot support pixel shading, there's no way that it'd be able to deal with the many polygons and such that Psychonauts will throw at it with any kind of reasonable framerate. :~
The official requirements can be found here
. Personally, I wouldn't purchase any less than a higher-end Geforce 5 series card (we're on series 7 now) if planning to run newer games.