i5 are not
better for gaming, i7 are just unnecessary. You spend an extra $100 for an extra 5 frames max. The reason for this is because games are not heavily threaded, ie. cannot take advantage of multiple threads. Battlefield 3 has the most heavily threaded engine and is suppose to be able to support 6 cores, but even when just using 4 cores there is only a tiny difference. The difference may be noticed online with 64 players though. Shogun 2 could only utilise 2 cores properly, and hopefully Rome 2 will be upgraded to 4 cores.
Back to the processors; the reason why you are paying the extra $100 for an i7 is because of the 'hyper-threading' technology, which essentially means that it has 4 physical cores, but can use them as 8 virtual cores. No games at this time or the near future can utilize that many cores and are far from doing so, which is why the i7 is a waste of money for a gaming machine. The i7 has a little more L3 cache in it too, but again this is unnecessary for gaming. If you do video editing/rendering, 2D and/or 3D art, then the i7 is a good investment.
That's a big price range you have there
if you can tell me exactly what you want this machine for ie. any photoshop, autodesk, sony vegas, gaming etc. that will help me a lot. If you can tell me what games you want this rigged for that would help heaps too, do you play Battlefield, Crysis, Farcry.
Do you need to purchase Windows, a new monitor, keyboard and mouse? Personally, when I built my PC I had to buy all these, because a brand new system just doesn't feel brand new without a new monitor, keyboard and mouse.