Matching CPU with Ram / Inspiron 530d

Hello to all:

I am a bit new to all this but I think I am going in the right direction...

I have an Inspiron 530 Desktop that I am going to update for my 13 year old nephew as his first computer.  The system was purchased back in 2008 and used for 6 months and then stuck in a closet - I discovered what true bliss really was once I got my laptop and wireless setup!!!  LOL

I have read many posts here on this subject but I still have a few questions that are not covered...

I want to upgrade the Processor - The E2160 was too slow to begin with - I was thinking of something from the Intel E7000 Series, such as the Core 2 Duo E7500 or should I max out with the Intel Core 2 Duo E8600?  I am leaning towards the E7500 but I am not sure...

Intel E7500 - (3M Cache, 2.93 GHz, 1066 MHz FSB)
Intel E8600 - (6M Cache, 3.33 GHz, 1333 MHz FSB)

Current Specs: 

Intel Pentium Processor E2160 (1M Cache, 1.80 GHz, 800 MHz FSB)

2.0 GB RAM (1024 MB x 2) DDR2 PC2-6400 (800 MHz)

Dell 0RY007 MotherBoard

Intel G33/G31 Express Chipset Adapter

Intel Graphics Media Accelerator 310

Questions: 

1.)  Which CPU should I go with? (E7500 or E8600) Why?

2.)  Do I need to match the FSB of the RAM with the FSB of the CPU? 

3.)  How does the MotherBoard fit into the update equation?

4.)  I am maxed out (MHz) with my memory - does this matter?

5.)  I plan to add 2.0 GB more of RAM (1024 MB x 4 GB total) - good move?

6.)  What is the "LGA 775 Rule"?

7.)  Is there an Internal Memory Controller on either of these CPUs?

8.)  Can I use the old HeatSink for the new CPU? 

9.)  Thermal Paste or Thermal Pad? Both?  Recommendations?

10.)  GPU - should I also update the Chipset?  

Thanks,

poolsharkzz