Surface discoloration of metal is due to heat and oxygen. Typically you see those colors as different oxides are formed, in this case, probably nickel (nickel plating/galvanization/first layer of chrome plating) or chromium (chrome plating) oxides which are generally very colorful. They are no longer really well bonded to the surface of the metal and can be wiped off. They were thin plating layers to begin with, not exactly industrial coatings.
GPU temperature sensor will be at the core and on the VRMs. This discoloration is not happening there, so unless you have measured this temperature directly, you can't rely on the card's sensors. Again, if the backplate is getting really warm, this would indicate the problem. Basically a fire hazard if it is.
Just based on the pattern I would take a close look at the DVI port for damage. 12 and 3.3 volts is supplied through the PCIe slot, DVI uses 5V, which must be being supplied by the card. If the DVI pins are shorted, there could be several amps flowing through there and heating the metal up. But as long as the resistance is high enough it might not trip the over current protection on the PSU. Since not much 5V current is needed in your late model PC, and the VS is an older design, willing to supply 110W on 5V before it shuts off.
GTX1660 is what it is. Depends on what you mean by a good card. Certainly the direct replacement for the GTX1060. Only slower cards from that generation are the 1650 and 1650 Super, with the latter being very close in performance. Basically RTX cards without ray tracing. Alternative would be something like the RX5700, though that more competes with the 1660Ti and RTX2060.
Certainly not up to spec with a 1440p 144hz monitor (I have the same one), but that depends a lot on the games you play. Recent AAA titles will be around 60FPS at best unless you cut back on the settings.
Yes, you won't be able to use your current CPU with a Z370 board. Needs to be Coffelake, so 8th and 9th gen only. Only reasonable chips worth going for at the moment are the 8700k, 9700k, and 9900k. 9600k is borderline. AMD chips are basically superior across the board below that point. R5-3600 will get you the same core config as the 8700k with similar overclocking potential. Comes with a cooler, and the motherboards are cheaper.