Prebuilt Upgrade - Case Shorting System?

I'm upgrading a pre-built system, so I didn't know whether to put this in the pre-built section or home built. I'm assuming pre-built, but I just stuck it here as I couldn't figure it out.

Anyways. I'm upgrading a Compaq Presario SR1151NX and I'm having an issue.

A co-worker of mine brought in his computer and told me that it just wouldn't start anymore. Sure enough, I got it home, plugged it in and hit the power button and nothing happened. So, I did the standard checks, made sure all the connections were tight, blah blah blah. Assuming the power supply had gone, I replaced the existing one with one of mine that I'm currently using and KNOW works. Then I went CMOS battery, etc, etc. That didn't help. So, I told him that it was almost certainly his motherboard and that I could upgrade the system fairly cheap.

$150 and 5 days shipping later and I start the upgrade. As I started dismantling his system I thought it strange that the original computer he brought me didn't have standoffs, but the motherboard tray (which is riveted on) has bumps where the screws go, so I assumed that this was a way to get around having standoffs. So I put everything together and go to turn it on and I have the same issue.

To avoid making this story any longer I'll just go ahead and say that I built the system on anti-static bags/mats and everything powered on with no problem. So, I'm assuming it's the case that's shorting out the system somehow.

I noticed that the paint/powder coating (whatever it is) on the motherboard tray is kind of scratched off (though I don't know how...) at the areas where the motherboard mounts to the tray.

My questions are:

1) Do I need to use the standoffs with this type of motherboard tray? And if so, how is it the original build didn't use them and worked fine for years?

2) If it's not the standoffs (and I don't think it is as the original build didn't have them) then what could it be and how can I find and fix it?