The Dell T 3500 is a good budget gaming platform.
X5687 Xeon is a fast 4core 8 thread CPU and pretty cheap.
The fastest setups are the W3680 Xeon which can be overclocked to about 4.2GHz 6core 12 threads.
Your memory setup is all wrong for that system. It has 3 channel RAM. So 12GB (3x4GB, or 6x2GB) modules would be correct.
I would go to 12GB for a 6GB gtx1060GPU, but for more performance a GTX1070 8GB or better would be best and then 18GB would be desirable.
Here are the userbenchmarks for that system. You can see the OC Xeons at the top. And the GPUs they're running in them.
https://www.userbenchmark.com/System/Dell-Precision-WorkStation-T3500--/2522
Here is the OC thread if you want to try that. But the X5687 is a solid choice also.
Myself and a few others have used Throttlestop software and unlocked CPUs to overclock OEM locked BIOS PCs. Throttlestop was designed for underclocking, and undevolting laptop computers to extend battery life. It also allows full control of Voltage and multiplier on unlocked CPUs. There is a...
www.techpowerup.com
There is a simple cooling mod in there for OC systems.
The stock PSU should handle up to a 150W GPU with a 6 to 8 pin adapter. If you look at the TDP rating of GPUs many non OC GTX1070 fall into that range. Newer stuff IDK, but there are probably many better choices in that power range now. Using the Dell PSU can provide more cash towards a newer GPU in that power range.
An aftermarket PSU can be used as long as the 5V rail is up to what the Dell PSU provided there. EVGA has some models that are good for that. Then the sky is the limit for GPUs.