I just replaced my GTX 7600 with a EVGA GTX X260. Thats were the problems start. I did not get a new motherboard so my X260 isn't in a 2.0 slot.
The problem is that when i'm playing games it gives the appearance of overheating. It will have color distortion and colored boxes will pop up. The card isnt over heating, it runs between 59-67 degrees Celsius. The problem is fixed by simply alt tabbing out of the game and when I reopen the game its fine again. I think its because the card is still trying to put out max frames and graphics quality without losing frames, but the slot can't handle it.
I think you also need to change your mobo; your older current one is causing bottlenecks for your 260.
The Pci-e 1.1 is NOT a bottleneck for the GTX260. In fact even the GTX295 on Pci-e 1.1 is NOT a bottleneck.
A friend of mine have a GTX295 on a Pci-e 1.1 with out any bottleneck, he get 22000 Vantage score, (crysis, 1920x1200, veryhigh, 40fps avg),( farcry2, 1920x1200, 4xaa, Ultrahigh, 80fps avg), (cryiostasis, 1920x1200, max setting, 50fps avg) as you can see the Pci-e 1.1 is NOT a bottleneck even for the GTX295 let alone the GTX260.