For the price range, it seems like a reasonably good setup for gaming. The main limitation will likely be the dual-core CPU, which could hurt performance in some newer and upcoming games, as 4+ physical cores are becoming the norm. The processor does have hyper-threading though, which could help.
Of course, to move to a decent modern processor with 4 cores, you would currently be looking at spending upward of 3 times as much for the CPU, and in most existing games it wouldn't improve performance all that much. This CPU is probably a good fit for a $500 gaming setup, at least for now. If it became a problem a couple years down the line, you could always upgrade to a quad-core processor then.
I don't know if it's the absolute best gaming build possible for $500, but I can't see anything major that I would change with it.