Neither, for gaming an i5 will suffice, it's just a waste of money to invest more as you will not notice any performance increase.
The vast majority of game performance relies on the graphics processing unit, the graphics card.
Xeon processors especially, are not designed for games, in fact their performance is significantly worse than the i7s, because they are server standard chips.
They're extremely expensive, have lower clock speeds (while significantly high core count, useless for applications which use 2 cores), and use ECC memory.
ECC memory is error correcting, that provides protection for bit flips, useful where downtime is of utmost importance (servers). It comes with the price of being slower than non ECC memory (and more expensive).
Can someone confirm if both are using the same CPU core instructions or they are different?
Not sure what you mean here. If you refer to the instruction set, then providing they are the same generation, yes.
I`m aware the i7 will support much betterL2/3 caches and trying to understand how is this possible ?
Again, I don't really understand what you mean by "support much better caches".
Different models have different amounts of cache memory.
Unless you're comparing the
Xeon E3-1280 v5 and the
i7 6700K which both have 8MB of cache.
