OK, the fact your led comes on the power button and the fact you have checked the connections suggests that the power button is broken. Dell have move very far on from the Dell Optiplex GX1 series, and you'll find it very hard to get replacment parts for this particular model anymore. The best way I can think of, is to look for a broken one on e-bay and use the parts from that. From what I remember, it's quite easy to take the switch from one to another, just two screws and two clips.
For you other problem. What was the last thing that was done on your PC, last peice of software installed, removed for example? Can you get into safe mode by pressing the F8 key during bootup?
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