Go Win7 Professional x64 at minimum.  Go Ultimate if you care about the extra languages.

Got the upgrading bug huh?

Whats wrong with your GTX 260?

agreed

and  get the NZXT Tempest Evo if its in your budget.

RAM is cheap and after Easter it will be maybe even cheaper, if you'll install a 64bit OS get 8GB. Big RAM doesn't increase maximum performance, but it minimizes the worst cases where performance gets a nasty hit by its lack.

I would suggest you at least take a look at PC Perspecitives "Hardware Leaderboards". Their builds do not include everything, so the prices might be a bit misleading, but otherwise they offer great advice.

Once again, if there's a microcenter near you, I'd suggest making the trip there to pick up a processor.

They have the i5 750 for $179.99(only 15 off of Newegg's price) or for 20 dollars more you can go with the i7 860.($80 cheaper than Newegg)

For under $1000? You WILL be able to buy a pretty hardcore gaming PC for that price, ESPECIALLY if you're not buying a monitor.

I built a PC for a friend last week with an AMD Phenom II X4 940 (3.0GHz quadcore), 4GB DDR2 1066 SDRAM, a 1TB HDD, and a not-hardcore-videocard (a GOOD one, just not a GREAT one) with a 19-inch monitor included in the price. Including the motherboard, power supply, case, a new quality mouse and keyboard, and extra fans (I think that's everything? Eh it's late and I don't care. Point is, it was COMPLETE), the price AFTER shipping was about $945.

You can pick up an i5 Quad core machine with an HD 5770 prebuilt for $930 on Newegg + $30 shipping. Just look for the 'can this machine run this game thread'.