Honestly though, I do not think upgrading that machine will work the way you want it to, particularly with the CPU. It doesn't look like that machine will support anything better than a Core 2 Duo, so that's going to be a bottleneck no matter what you do. Dell tends to deliberately give you limited options for upgrading the CPU, because they want you to buy a whole new machine from them for $700, not buy a CPU from Newegg.
Given that grim reality, in order to upgrade that machine, you'd almost be buying all the parts for a whole new computer anyway, so you'll end up with a far better machine for less money if you build from scratch. The hard drive may be the one component you want to keep.
Also, if you do buy a prebuilt system again, let this be a lesson not to buy small form factor machines.