Red, That system can probably scrape by with a couple of minor changes (I assume you mean you have a Radeon 6850). 1) Much more RAM. As much as your motherboard can manage. 2) 64-bit Windows. There are already rumblings about upcoming games requiring 64-bit. My own HTPC has a Phenom II X2 550, which seems to benchmark around the Q6600, Radeon 6850, and 12 GB RAM, and I have no problems with anything I’ve thrown at it.
That said, Q6600 is at the very tail end of its usefulness, and it’s unlikely that your motherboard supports a significant upgrade over it. You’ll be able to get by for now, but budget for a new mobo, processor, and RAM (i.e. faster, since your current mobo likely doesn’t support anything close to the latest-and-greatest) in the near term.
Can’t recommend a good wireless mouse and keyboard, but if you don’t already have one, definitely get a wireless 360 controller for PC. I think you can get a dodgy third-party receiver that will work with your existing 360 controllers for cheap, but I’d recommend ponying up the $50 for an official MS one (which comes with a controller, and it’s always nice to have extras).