Should I buy or should I build? Design/Animation student with Gaming in mind.

You need to say what the specs of the Dell XPS 8500.
XPS 8500 means nothing to anyone.

The way dell sells products, that could mean sometimes 16+ configurations.
Pretty much XPS 8500 tells us the case you're using if even that.

The main differences between building/buying though:
Building: You get more performance for your money, quite a bit more. For $1000, I got an i7 with a HD7950(a LOT better GPU than the one you have)
Buying: You get peace of mind that it will work when you get it.

Also, location. You're aussie so good deals for Americans, may not work for you in Australia land.

Why is dell selling you such an extremely weird ram situation? 2x2GB and 2x4GB? If you customized that let me know.

Intel Core i7-3770 is last generation.

2TB of HD space? How much data do you save? Some of my friends have never used past 250GB let alone 1000-2000 GB of space. I on the other hand have 6 TBs of HD space.

This is partially why building it yourself can be better and learning in general.
Some tips though when purchasing a premade PC:
-NEVER ADD MEMORY
This is where people like Dell make their largest profit margins. They charge you an arm and a leg to add memory. Usually, you can find the same memory at half the price.
-NEVER add HDD space
Same as above

What I would do in your situation right now and the first step I would take is this:
Go to newegg (I dunno the austratilian extension I'm assuming .au?) and find out how much each of those parts cost in Aussie dollars and report back. It's hard to know the deal you're getting if you don't know how much each component costs. I know how much it costs in American Dollars, but that doesn't help you haha.

And data wise, storage can be expanded with enough spare space, ask your fellow students or professor roughly how much space the course your doing will take, If they are any good at their job they should have a rough idea, then add approx 200-300gb on top of it for personal files like music, games and a few movies.

The XPS is reasonable for your needs, except the graphics card would need replacing, (a hefty cost on top) and it is overpriced (considerably).

PCPartPicker part list / Price breakdown by merchant / Benchmarks

CPU: Intel Core i7-4770K 3.5GHz Quad-Core Processor ($389.00 @ PCCaseGear)
CPU Cooler: Cooler Master Hyper 212 EVO 82.9 CFM Sleeve Bearing CPU Cooler ($35.00 @ PCCaseGear)
Motherboard: Gigabyte GA-Z87X-UD3H ATX LGA1150 Motherboard ($229.00 @ Mwave Australia)
Memory: Corsair Vengeance 16GB (4 x 4GB) DDR3-1600 Memory ($145.00 @ Scorptec)
Storage: Seagate Barracuda 1TB 3.5" 7200RPM Internal Hard Drive ($69.00 @ PCCaseGear)
Video Card: Gigabyte Radeon HD 7850 1GB Video Card ($169.00 @ PCCaseGear)
Case: Corsair 200R ATX Mid Tower Case ($75.00 @ Mwave Australia)
Power Supply: Antec High Current Gamer 520W 80 PLUS Bronze Certified ATX12V / EPS12V Power Supply ($85.00 @ Scorptec)
Optical Drive: LG GH24NS95 DVD/CD Writer ($21.00 @ Mwave Australia)
Operating System: Microsoft Windows 8 (OEM) (64-bit) ($99.00 @ PCCaseGear)
Total: $1316.00
(Prices include shipping, taxes, and discounts when available.)
(Generated by PCPartPicker 2013-06-09 12:29 EST+1000)

Australian prices are expensive. The Dell may be a better choice for you, but remember, you won't be able to game.

The build above is more expensive. But it can be overclocked, uses high-quality parts and will be able to game on modest settings.

I meant that you should gather prices that you can achieve. I know what the American prices are and can use a converter to get AUD. I don't know how much you can actually acquire those parts for though.

For what you're doing, you CERTAINLY don't need the build malstrom purchased. This is an enthusiast forum, so a lot of the time you get more than you need.
I'm going to break it down by parts to explain how each will effect your build:
CPU:
Believe it or not, we've made HUGE advancements in the CPU age. Thus, spending a lot on this part yields VERY diminishing returns. Many people here spend 300+ on this part and then overclock it (raise clock speeds) a lot. Most reviews however show VERY diminishing returns for this added clockspeed. In fact, it may only add between 1-5 frames per second in gaming, and 15-20 second faster encoding times. To the average user, these do not warrant the huge price increases.
Most users on here will recommend you builds for overclocking and well, for the egoboost people get for having the best thing out on the internet which for the most part is the majority of parts that mastrom listed. Given I understand what most users want who aren't huge PC enthusiasts here is what I recommend
Recommendation: i5-4670
It's faster than anything you've ever owned and isn't an overclocking part.
CPU Cooler: Stock. Trust me, you don't need to spend an extra 35 dollars on it. Use the one intel ships with their CPU.
Motherboard: Asus Z-87A
This is a decent board. You do NOT need a board that costs over $200 dollars. The returns again are LARGELY diminishing. What you're paying for when you pay $200+ for a motherboard is to squeeze overclocking of the CPU an extra 100-200mhz. Again, you'll see EXTREMLY diminishing returns on this.
Ram: This is where you need to spend some cash. Based on your needs, get 16 GB of ram. This should only cost you $120 dollars tops though in US prices.
Storage: You'll have to tell explain to me more about what you're animating. Are you doing video heavy animation? This requires you to know a little more about how large the files you're working with are because this is your expertise.
Case: This is a personal thing. You need to look around. I recommend Fractal Design Define R4, or a case like it. The case he recommended works well too.
VideoCard: Now that you've saved tons of money picking lots of parts less expensive you can spend money where it counts. Most reviews have proven that CPU means very little for gaming. Anandtech just did a review showing the % change in performance between top of the line CPUs and low end CPUs and it was negligible at best. You can save money and go with the HD 7850. Or you can spend more and go with the $7950.
Power Supply: Get something that is 500W. Pick from Corsair, OCZ, Evga, Coolermaster, (I may have missed a brand or two). Just use a reputable brand like those though and you'll be good.
Optical Drive: I didn't even purchase one, but you'll probably want one. Really just pick one with a lot of reviews and good ratings. It's an optical drive, pretty much everyone knows how to make them at this point.
OS: You need Windows. You can find a good deal usually. I'm sure you know how to purchase this.

I didn't list prices because I'm not from Australia and don't know the prices. I would NOT go with a lot of the parts picked in the mastrom build as the CPU and mobo are definitely not what you need given what you said. Those are for enthusiasts who get performance parts, even if they don't necessarily need it to have the fastest latest tech.

Edit: In short I don't mean to attack anyone's recommended build. There just isn't a review in the world that will support the CPU or Mobo choices given what you've asked. You don't overclock from what I understand so those choices are ridiculous for what you asked. You can get a cheaper faster processor in the i5-4670k given the fact that it's newer. There's no reason you should have to spend more than $1000 AUD. The build I listed, should be under $1000 and be better.

I couldnt agree more ( hopped in cos the birds are too damn noisy to sleep) most of those parts are overkill.

OP. Have you validated your Email? Cos your PM function isnt working, I'd be happy to give you a basics in building Just dont want to clog up the forum.

Back to bed after snacking I'll see if I cant design a rough build as well for the morning.

Yes. You have choices to upgrade as well.
CPU recommendation: http://www.tomshardware.com/reviews/gaming-cpu-review-overclock,3106-4.html
Toms hardware recommends the i5-3570k. But if you don't overclock the i5-3350P. However, it's a month old and new tech is now out so the i5-4670 is here. You could even step down to the i5-4750.

CPU speed: is important, but it will only increase performance so small that it's not worth the $150+ price increase.

Let me know how much you can find those parts for though in Aussie Land.

Price the system out and lemme know how much it comes to.

Don't forget a harddrive (I recommend a SSD Samsung 840 120 GB and then purchase HardDrives (non SSD) as needed for storage)

The PSU (500 Watts)

CD Drive

And look for a case that fits your needs and styling.

I can, but I'd recommend looking around to get the best deal haha. My prices are different than yours. A brand may be a good deal for me, but not for you dependent on shipping etc. I can give you recommendations as to what brands and specs to look for but giving you specific parts may cause you to spend a little extra if you aren't just trying to match criteria instead. Here is the Criteria:

The SSD I used is the Samsung 840. I recommend getting the 120GB and then adding additional HD space as you need it since you aren't sure how much space your stuff takes up (it won't be hard to add just slide it into the case and connect it to the mobo and BOOM more HD space).

PSU - I got the CoolerMaster Silent Pro M2. Really like I said, just find a 500W PSU in your budget from Corsair, CoolerMaster,

CD Drive - literally ANY will do. Again, just make sure it's from a reputable company. Hell, even if it isn't this is the cheapest part of your PC and the LEAST used part of it.(looking at newegg there are only like 6 manufacturers of this now so really you can't make a mistake)

Case - Fractal Design Define R4 is my choice. There are others though. BitFenix Prodigy, Corsair 550D, Antec P280

I strongly recommend though reading a couple reviews and learning a little. You're going into a field where you'll be heavily using PCs a lot. You should know about the device you're using as it will influence your work quite a bit. Any person doing work involving graphic design, coding, etc. should know about their tools. Similar to how a police officer would know how to take a part, clean a gun and use it, or a construction worker can tell you all about drills and which ones are the best for which job, you probably want to know what computer specs are important to your work. I can imagine it will help quite a bit when you get into the workforce.

The more ya know ya know? Last thing you want to do is blindly follow someone's instructions without knowing why!