Xeon vs overclocked i7 Extreme for lowest latency

Anandtech did a detailed review of the Core i7 4960x recently.

But honestly, these times don't mean all that much without knowing what kind of algorithm you're using. Assuming there isn't that much processing to be done, then the ethernet connection is going to be the real bottleneck, like @huseyin said

Xeon Processors only advantage over i7 is the Memory Handling capacity and its resilience. i7 has certainly more clock rate and it cannot handle large amount of memory. Extra cache just makes the Physical Memory able to handle large data and i/o processing. Also Hyper-threading does that for Intel. It will show a difference only if you are going to directly control processor by your algorithm.

If you are hesitant to use ASIC/RISC+RTOS strategy then you can go forward with any Linux Based 64-bit OS on Intel® Core™ i7-990X Processor Extreme Edition (12M Cache, 3.46 GHz, 6.40 GT/s Intel® QPI) the best offered by Intel.

Also if you are thinking to use the processor for large amount of data in near future my pick will be definitely Intel® Xeon® Processor E7-8870 (30M Cache, 2.40 GHz, 6.40 GT/s Intel® QPI) . this is having a lesser clock rate and hence more latency.

I'd recommend a Nation Instruments cRIO. It has both an Intel i7 CPU and an FPGA. It can run either Windows, Linux or an RTOS. You can program it in a high level language and run code either on the i7 or on the FPGA. The low level hardware connectivity to your sensors will give you far lower latency than any PC can.