Re: Please help me upgrade my system
The only *wasted* money from transitioning to a smaller case will probably be for the MicroATX motherboard, as you're then investing in the older technology.
Spec-wise you're probably still okay, just make sure that whichever MicroATX case you buy will be big enough for your GTX260 (I had a GTX280 and had to chop the HDD bays out of my case to fit it in).
It certainly wouldn't be a waste of money to invest in something like a GTX960 (or 970 if you want to pay that much extra), as potentially that could be moved forward to a new build in the future.
The CPU you have is still perfectly adequate for gaming in my opinion, and 6GB is satisfactory for most games if I'm honest (but it's DDR3 anyway, if you added a 4 or 8GB stick into the mix then it's probably not a bad thing!)
Adding an SSD would be a good idea if you wanted to as well, as again, if you decided to go for a complete new build in the future, you could re-use it! Don't bother spending any extra money on an old platform to get SATA III, it's the random read/writes that matter the most, and you're not going to see any huge performance benefit between SATA II and III in that respect.
The main item to upgrade if you want to continue playing modern games is the graphics card I think. I acknowledge it was a bit of a beast when it was released, but that was 7 years ago so it's showing it's age now, especially with the amount of graphics memory! Anything from a GTX750 upwards would be an upgrade in my opinion, but you wouldn't go far wrong with a GTX960 and that would bring you bang up to date!