Not quite true about the old CPUs and modern gaming. The 3 channel DDR3 lets them keep up fairly well. With the older GPU he has it won't be an issue, it has a low level of DX12 support anyway.
But many people prefer the smaller single CPU T3500 X58 chipset workstation which can run some of the unlocked CPUs and be overclocked. There is also a 2 CPU T5500 which is the same Mid Tower size as the T3500. The T7500 IS beastly.
But anyone can go to userbenchmark,com and pulll up many examples of each one and see how they compare to newer tech.
https://www.userbenchmark.com/System/Dell-Precision-WorkStation-T7500/4566
https://www.userbenchmark.com/System/Dell-Precision-WorkStation-T5500/78
https://www.userbenchmark.com/System/Dell-Precision-WorkStation-T3500--/2522
I had one T3500 user running a GTX2080 turn it down to 720P to try and bottleneck the overclocked CPU and nothing happened.
The old CPUs do not support the newer AVX instruction set. So there is a some truth there.
As far as the price it depend on what's included. if it has a low powered Nehalem, Aluminum heatsink, and needs a CPU riser for what you want to do then you will have to spend more. But maybe step by step suits your situation. If it has one of the faster 6 core 12 thread Gulftown CPUs and the big heatsink you may not need that 2nd CPU. X5690 6C/12T, and X5687 4C/8T are solid choices.
In the unlikely event that you have a problem with the Dell workstation PSU, there are plenty more where that came from.
It has RAID 0 BIOS support, a pair of cheap small SSDs will get you SATA3 performance. 3 or more if you need to go faster. But an SATA2 SSD provides a huge boost over an HDD anyway.