Some things you can try before buying/upgrading:
1) Dolphin Ishiiruka. Admittedly, it's been over a month since I've test/played/worked on the Xenoblade Pack, but the last time I played the latest Ishiiruka ran Xenoblade much more smoothly than the master build. The last time I checked, master build had an issue that slowly caused Xenoblade to get more and more laggy as I played when interacting with some menus.
2) Don't use Anti-Aliasing if you can help it. The dolphin engine is much more efficient with IR than AA, and IR "basically" accomplishes the same thing AA does, and then more. Use IR as your main graphics setting. For example, 4x IR and no AA should look better than and be less of a performance strain than 3xIR and 8XAA.
3) Use DDS textures, especially if you aren't using prefetching. Dolphin handles them much more efficiently than PNG.
Hardware info:
A 3570k is maybe around 15% faster at stock settings, but pulls away massively with overclocking potential and also consumes around half the power as a i7 960. That said, you could overclock your current CPU and get some use out of that. A few years ago I upgraded from an AMD Phenom 865BE to my 3570k, and your 960 is smack in the middle of those two performance-wise, although my old CPU was OCed a lot - so it could be close to what you're experiencing now. Anyway, I noticed a huge improvement with the upgrade and the OC on my 3570k, so I bet you'd see a nice boost if you were to upgrade. At this point, however, I would not upgrade to the 3570k, it's a couple generations behind what intel has out now. You'd want to look for a new model.
In terms of this texture pack, you're going to want more RAM if you choose to use the prefetching option. This pre-loads the textures directly into RAM at game launch so it's not constantly loading, which is what causes massive stuttering. You need around 10GB of RAM to be able to utilize prefetching with this pack, so 16GB is the usual amount you'll want. I only have 8GB of RAM and don't use prefetching, and I never saw lag with the last iteration of Ishiiruka Dolphin I used (r427) with DDS textures and the PC in my sig.
Having a video card with more VRAM also helps a lot with HD textures.
Edit - I forgot that there is also some lag that persists in nearly all instances of the game, and that's the shader cache combat lag that happens every time you boot up the game. As you play the game, different effects from combat will be loaded into a cache and will stutter until all said effects have been successfully loaded into the cache. There are async shader options in Ishiiruka that help circumvent this issue, but causes other issues such as temporarily blacked out textures for a second while they're loaded into the cache.
1) Dolphin Ishiiruka. Admittedly, it's been over a month since I've test/played/worked on the Xenoblade Pack, but the last time I played the latest Ishiiruka ran Xenoblade much more smoothly than the master build. The last time I checked, master build had an issue that slowly caused Xenoblade to get more and more laggy as I played when interacting with some menus.
2) Don't use Anti-Aliasing if you can help it. The dolphin engine is much more efficient with IR than AA, and IR "basically" accomplishes the same thing AA does, and then more. Use IR as your main graphics setting. For example, 4x IR and no AA should look better than and be less of a performance strain than 3xIR and 8XAA.
3) Use DDS textures, especially if you aren't using prefetching. Dolphin handles them much more efficiently than PNG.
Hardware info:
A 3570k is maybe around 15% faster at stock settings, but pulls away massively with overclocking potential and also consumes around half the power as a i7 960. That said, you could overclock your current CPU and get some use out of that. A few years ago I upgraded from an AMD Phenom 865BE to my 3570k, and your 960 is smack in the middle of those two performance-wise, although my old CPU was OCed a lot - so it could be close to what you're experiencing now. Anyway, I noticed a huge improvement with the upgrade and the OC on my 3570k, so I bet you'd see a nice boost if you were to upgrade. At this point, however, I would not upgrade to the 3570k, it's a couple generations behind what intel has out now. You'd want to look for a new model.
In terms of this texture pack, you're going to want more RAM if you choose to use the prefetching option. This pre-loads the textures directly into RAM at game launch so it's not constantly loading, which is what causes massive stuttering. You need around 10GB of RAM to be able to utilize prefetching with this pack, so 16GB is the usual amount you'll want. I only have 8GB of RAM and don't use prefetching, and I never saw lag with the last iteration of Ishiiruka Dolphin I used (r427) with DDS textures and the PC in my sig.
Having a video card with more VRAM also helps a lot with HD textures.
Edit - I forgot that there is also some lag that persists in nearly all instances of the game, and that's the shader cache combat lag that happens every time you boot up the game. As you play the game, different effects from combat will be loaded into a cache and will stutter until all said effects have been successfully loaded into the cache. There are async shader options in Ishiiruka that help circumvent this issue, but causes other issues such as temporarily blacked out textures for a second while they're loaded into the cache.