Hmm, well i'm not sure on the bottlenecks, what processor is it? At a glance, i'd say maybe the grapics card at some point, there doesnt seem to be any glaring bottleneck.
Regarding the soundcard, yeah no problem, the temps might rise a bit, but generally if there is a spare slot in between them, shouldnt be a problem.
On the PSU, sounds like you have a non modular PSU, the only thing you can do is tidy the cables up, get them as small as possible, and then put them where there is no fan obstruction. Usually behind the mobo tray, or in the space DVD drive spaces.
I'd go windows 7, it gives fractionally more fps in games, but mostly its a newer OS, and far greater than XP, no point in buying old software.
Rig sounds good for a buget end gaming system, adding that extra 2gb of ram will smoothe over any problems and generally make everything a bit faster. Dont forget tho, to use all that ram, you will need a 64 bit OS
I cant really help you with the Ram, but ram is very sensetive to volts, and anything above 1.65 is likely to fry it, unless its high end overclocking ram, (which i think hyper x isnt). My best bet is to reset your BIOS, and see what happens.
Hope this all helps!