1| Not daydreaming but seemingly uninformed as with each compromise you make(size in this case) you'll have to learn to live with each compromise made.
2| When you want to go for a SFF system you'll need to ask yourself if you can deal with lower power from your system as heat build up can and will be an issue. With all things in the computing industry when heat starts to creep up the performance levels start to throttle. You may be able to add a 240mm AIO cooler inside the Core 500 but to what degree are you cooling your system? Often you're going to see that moving for a SFF system that is for aircooling like the Node 202 can be a more suitable candidate.
3| A thumb rule is that each component receives it's own 120mm radiator(as per the lore for watercooling, in my sig space) but often this is misinterpreted to end up with results being anywhere from bad to worse as the amount of resources dropped in such an endeavor, when given bare minimum's to work with, seem fruitless. On the topic of funds, AIO's don't come cheap unless they're off Ebay and that place in itself brings up questions.
4| You didn't state your full system's specs either. SO please pass them on with your OS and components connected. A non reference GPU will also produce road bumps to your AIO endeavor.