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is there a way to squeeze in a i7 or xeon

Xeon will be useful if you plan to do content creation and video editing whereas the single core performance on the i7 is better which will improve performance in games. That said, if you plan to do video and photo editing then a xeon would be a bit better than the i7 (only they are a lot more pricey).

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I had to break the budget buy the extra $100 because you are doing virtual machines to the i7 and extra ram brought up the price:

 

 
CPU: Intel Core i7-4770 3.4GHz Quad-Core Processor  ($286.99 @ SuperBiiz) 
Motherboard: ASRock H97M-ITX/AC Mini ITX LGA1150 Motherboard  ($82.98 @ Newegg) 
Storage: Crucial MX100 256GB 2.5" Solid State Drive  ($104.99 @ Amazon) 
Video Card: EVGA GeForce GTX 970 4GB ACX 2.0 Video Card  ($329.99 @ SuperBiiz) 
Case: BitFenix Prodigy (White) Mini ITX Tower Case  ($76.99 @ SuperBiiz) 
Total: $1093.66
Prices include shipping, taxes, and discounts when available
Generated by PCPartPicker 2014-12-23 06:39 EST-0500
 
What I can suggest is that you build a mATX system in the Bitfenix which will possibly help cut down on the price.

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