Can I use my old PC to build a new power horse?

I believe the intel core i7 2600k will far out perform the xeon. This is the setup I would use:

CPU: Intel Core i7 2600k $300
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

Graphics: 2x EVGA gtx 570 in SLI $660
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

MoBo: GIGABYTE GA-Z68A-D3H-B3 $130
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

PSU: OCZ ModXStream Pro 700W $90
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

Case: Antec Three Hundred $55
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

HDD: HITACHI Deskstar 7K1000.C 0F10383 1TB $100
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

RAM: G.SKILL Ripjaws Series 16GB Memory Model F3-10666CL9Q-16GBRL $75
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

Heatsink+Fan: CM Hyper 212+ $29
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

DVD-ROM: SAMSUNG 22X DVD Burner $16
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

Total: $1455

This is sure to be a top notch computer with the ability for the i7 to hyperthread. It'll be running 8 processes at once and is one of the best CPUs out on the market, after the extreme edition CPUs. The 2 gtx570's will be more than enough for any graphics needs, and they perform better than a single gtx 580 and I believe even better than a gtx 590. The motherboard supports SLI which is important. The power supply is from a reputable company and is more than enough for SLI. The Antec 300 case should be roomy enough for all components and it has great reviews. 1TB harddrive to store your videos. 16GB of RAM should be overkill, but for a more future-proof system. The HSF is for mild overclocking of the CPU. DVD-ROM is self-explanatory, you can change to a blu-ray read/write if you wish

For your needs it seems like you want a system that can handle plenty of RAM. I would say go with a 3930k

http://www.newegg.com/Product/Product.aspx?Item=N82E168...

and a motherboard with the full 8 RAM slots for maximum expandability such as this one

MSI X79A-GD65(8D) Frio Adv LGA 2011 $329.99
http://www.newegg.com/Product/Product.aspx?Item=N82E168...

While you can get 64 GB of RAM (two 32GB 4 stick sets) that's a bit expensive right now. 32GB, or even just 16GB should be plenty for now though but it just depends on your budget. Since you won't be gaming though I suppose the ability to use 3 or 4GPUs isn't of much interest to you ^_^.

You won't fit such a beat in your old Sony Case, but you may be able to use your old optical drives and HD if they are SATA, but considering how cheap new DVD burners are it makes sense just to buy one. It's a good idea to buy a new 7200HD as well and if you can afford it, an SSD.

A lga2011 CPU like the 3930k would be the successor to lga 1366 CPUs like that Xeon you chose. It also allows for some overclocking to get extra performance.

A good case can save u alot of headache, plus with this rig wouldnt u want to show it off some