For the xw8400 you can do much better than your current processor(s). First, you want to be running two quad cores. The E5160 is a dual core. You can only run those processors that are in the BIOS's "microcode" list, and you can see what those are by getting the latest QuickSpec for the xw8400. Don't bother with dual cores..... the quad cores are so reasonable on eBay now. Get two of the same ones, and get the latest sSpec (stepping) code because those have Intel bug fixes built in. Make sure to update your BIOS to the latest before starting anything else..... that will get you the latest microcode list automatically.
Make a list of the sSpec codes for each of the high end of the quad cores..... E0 is more recent that C0, and G0 is more recent than B3. For example, the X5365 (fastest HP ever certified for that workstation) has the earlier SLAC3 B3 stepping and the later SLAED G0 stepping... get SLAED if you want to spend the extra money over the X5355 that I am using.
As a minimum, get the SLAEJ version of the E5345. Faster from that one gets higher max wattage, as expected, but it is easy to monitor processor core temps with the free version of HWMonitor from CPUID.com. I'm running two X5355s with no problem, one under the standard single tall heatsink/fan and one under a fan-wiring-modified double tall xw8600 heatsink/2 fans side by side.... minimal difference, and our son has been hammering that rig with gaming for 2 years now, once we got that video card you see. That project is posted about in here from the past.
Get at least 8-12 GB of HP label RAM and a system builder W7Pro64 from Amazon or NewEgg.... and get one of the IBM 160GB SSDs I've posted about here. That combo will make you very happy. You can go up from there.... Below is a teaser from mine. That Primary hard disc score is from a spinner.... the SSD I mention will get you 7.7 or 7.8. You can see I'm running two X5355s there, for 8 cores total. The max possible scores for each category is 7.9:
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