700c vs 26" simply describes the wheel size---you can still get a bike either too large or too small with either one of those wheel sizes, since *frame* size generally determines whether or not the bike fits.

First off, 700c = roughly 27.5", so about 1.5" larger than a 26". However, different tires can change this too, so it shouldn't be much of a concern for you.

Second, $400 isn't much, but you still have a lot of options. Big changes can be made in small, less expensive ways. 1) try raising the seatpost. 2) buy a bigger cushier seat that appeals to you -- you don't need a new bike to have a new seat. 3) buy a taller stem for the bicycle -- it's like the front version of your seatpost and can make a difference in ride geometry; in case the bike is too small, but only slightly so, this may be an adequate stop-gap measure. 4) take your bike to your preferred local bicycle store (LBS) and have them replace the bicycle's cables, relube the drive train, and otherwise check things over.

For #1: free, #2: $30-100, #3: $20-40, #4: $50-100. As you can see, even in an unlikely scenario where you spend at the max, you can probably refit your current bicycle for a max of $240. Throw in new tires and tubes and you might make it $280 total. Not bad, *and* better than a new bike at Walmart.

Why better than a Walmart bike? Because those bikes are generally so poorly constructed that you will A) not enjoy riding it so that it will have been a complete waste of money (spending $400 on something you never use as it rusts in the garage!); and B) the bike will need maintenance quickly, and that will mean your initial cost will also require money to fix its problem, which probably means you won't ride the bike... so see (A).

Another option if you do need a new-to-you bike, is to find a used bike locally that does fit, and then have it tuned-up. Try craigslit.org or your local newspaper's classifieds. Enlist the help of your LBS, or someone who knows something about bicycles to help you feel confident about fit and function.