Greeting! Some notes, see if they make sense:
Much appreciated for your speedy reply!
5700X3D
The 3Ds often show no benefits in a development environment. On the contrary, outside gaming, they generally perform worse than the non-3D variants; by a somewhat negligible factor, though - only worth considering if you must squeeze every penny and every ounce of performance.
Thank you for enlightening me on this. I was reading somewhere that the L3 memory cache (about 96MB) on the 5700X3D would be more utilized than the 5800X (which I was comparing it with) for game development so I thought it might be better.
MSI VENTUS XS OC GeForce GTX 1660 Ti 6 GB Video Card
Do consider something a bit newer, this GPU stands out. Look for one with no overclock (you want stability), aim for minimum 8GB vRAM. Perhaps you can get your hands on a used 3060 12GB vRAM?
I thought maybe 6GB could scrape by but you are right and it is an older graphics card so I'll heed your advice and go for the minimum 8GB. Or if I can find a decent used 12GB, I'll certainly try for that.
Just to note, I am still a very green newbie to the world of game development so I was thinking of just starting off with creating simple 3D games that are not so graphic intensive and I am not thinking about MMORPGs or anything huge at the moment so I thought the lower specs might be ok. First, I just want to learn the Unreal Engine and create graphically uncomplicated games that do not require so much CPU/GPU power. But I would like a machine that can at least run the Unreal Engine 5.3. I did consider maybe learning Unreal 4.0 on a slower machine but I thought it would be better to just go with the latest 5.3 version and know all the features rather than having to learn 4.0 and then 5.3.
Western Digital Black SN770
A big red flag atm but you’re getting Win 10, so no flag. 
Prior to Windows 10, I've been on Windows 7 Pro for a long time because it seemed the most stable. I'm not a big fan of Windows 10 either but Windows 11 just crashes too much so I think maybe I should stick to Windows 10 Pro until something more stable comes along. If I was better at Linux, I'd want to install Linux instead of Windows but I'm not versed enough to do all the builds and troubleshooting on my own to do work arounds.
be quiet! Pure Power 12 M 750 W
This system does not need 750W PS, 550W would be plenty sufficient. Perhaps that’s where the GPU budget can be found?
I thought it might be good to have extra power if I wanted to add another graphics card later so I opted for a bit more juice.
By the way, is it worth it to add another graphics card (probably the same series) to this later or is it better to just get ONE good graphics card?
165 Hz Monitor
If this is for development, then it’s utterly unnecessary. How about 2x IPS screens that can actually reproduce colour accurately?
I didn't think about that. I thought maybe getting a color correction tool on the monitor like the Spyder gadget would work but maybe I'll look into getting the 2x IPS screens as you suggested.
around $1500
Excluding $300 for the screens (eyeballing), how did you arrive at $1200 with this setup?
It's been a long time since I've built PCs so I used pcpartpicker.com to help me get started. My original build went well over $2,000 and did have the specs you suggested earlier (Gigabyte GAMING OC Radeon RX 7700 XT 12 GB Video Card, AMD Ryzen 7 7800X3D 4.2 GHz 8-Core Processor, Gigabyte B650 AORUS ELITE AX ATX AM5 Motherboard, etc) but I do not want to spend so much initially until I learn the world of game development by first creating simpler and less graphic intensive games.