An i5 is good enough for gaming, but you plan to do any heavy processing like video processing/editing an i7 would help. The performance of an i5 vs i7 on gaming has a minor effect, so I would spend that money on a better graphics card instead.
On the build your own computer path get ready to learn to how fix computer problems and have the time to do so. Sometimes you do end up with bad computer parts and you need to find which part is bad through some testing.
I agree with the i5 vs i7, but disagree on building your own computer causing problems.
As long as you get quality computer parts built by quality manufacturers from reputable merchants you'll have less issues than with pre-built PC's. I've spent no amount of time working on issues. In the off-chance you receive a bad product you can easily figure it out by unplugging components until you isolate the problem child.
do you have a source for this? i've had 0 issues with gaming in win 8. I wouldn't recommend XP. it is beyond the end of life and MSFT no longer issues security updates.
I use Windows 7 and love it. I know a lot of developers such as Valve have condemned Windows 8 as a gaming platform. Good to know you haven't had any issues.