Why does Fitzgerald choose to give the history of James Gatz at this point in chapter 6?
Part of the intrigue surrounding Jay Gatsby is his unknown origins. Guests at his parties speculate wildly about his past: some think he once killed a man, while others think he was a German spy during the Great War, and some suspect that he's a bootlegger; one woman believes that "he doesn't want any trouble with anybody" because he seems to interested in keeping everyone happy. And, to top it all off, no one ever sees him. No one at the party even seems to know what he looks like.
Later, when Gatsby first begins to tell Nick his history, it simply seems too cliche and fairy-tale crazy to be true. Gatsby talks about having come into a great deal of money when his entire family perished, living like "a rajah" in Europe, and so on, and Nick says that listening to him "was like skimming hastily through a dozen magazines." Nick cannot believe the stories until Gatsby produces pictures and medals to prove his tale is true. Fitzgerald allows readers to get to know Gatsby in much the same way that Nick does. If he'd had Nick tell us the real story of James Gatz early on, we wouldn't be able to experience the mystery of Gatsby, and the persona that he creates is part of what makes him so "great," part of what makes Nick like him, despite the fact that Gatsby "represented everything for which [Nick has] an unaffected scorn." His mystique is important to his character, and so Nick ought to wait to tell us the real story if Fitzgerald wants us to be drawn in by that persona.
There was growing suspicion about Gatsby within the context of the novel including the curiosity of a reporter, which actually begins this chapter. This is part of the reason Nick chose to include the history of Gatz at this point. The other reason, more connected to Nick and the major themes of the novel (appearance/reality, the American dream), was Nick’s fascination with this man. Gatsby was actually the type of person Nick would tend to dislike: a socialite, elitist, throwing parties for other socialites that he is not really close to, seemingly superficial, and engaged in bootlegging/drug dealing. Nick mentions, early in the novel, how he prides himself on honesty. Here we have Gatsby who is living a lie and yet Nick finds something endearing about him. Nick is connected to Gatsby (or Gatz) because he is, like Nick, from a small town and naively chasing a dream. This history of Gatz could probably have occurred earlier in the novel, but that would go against the premise of the book. Fitzgerald had to wait to give this history because the reader is getting the story from Nick. Nick first met Gatsby; it wasn’t until much later that he learned of Gatz and this really helped him understand the man and why he found Gatsby/Gatz so fascinating. In order to give the reader a complete concept of Gatsby, Fitzgerald first had to develop the character of Gatsby before he could present his alter ego Gatz.