New games doesn't "NEED" to use SM3.
Some games do. Look at Splinter Cell Double Agent. X850 and X800 series owners can't even play that game.
I would like to know what's the argument to go with an inferior card, 20 bucks more expensive. Use the 7600 GT with HDR in Oblivion, and tell me how many FPS you get.
Like Cleeve said, the X850XT and 7600GT are fairly close overall that it would be silly to spend more on the X850XT and already have 2 (or more) games that it can't play.
I'll tell ya, I have a X800XTPE, a 6800U, and a X1650XT all in AGP and have played Oblivion on all three. The worst thing about the 6800U for me was not overall performance, but having to choose between FSAA or HDR while playing at 1024x768 resolution. I switched back and forth between the two (fsaa+bloom or HDR), not fully happy either way, and eventually upgraded to a X1800XT because of it.
The X800XTpe did offer more performance than the 6800U when running fsaa/bloom. I recently compared it against the X1650XT in a few games and it was about the same in farcry, fear, and HL2 lost Coast. But the X800XTpe won NFS:carbon by a few fps. It can't do motion blur in that game, but really the X1650XT and the whole GF7 series can't handle that anyway without low fps. Oblivion it won by a few fps on high details, and the X1650XT won by a few fps with my medium detail settings. I'd take the X1650XT anyday for Oblivion as it can run 4xAA + HDR at 10x7 with fairly decent medium or higher details. So while in my 5 game test, the X800XTpe was a tad ahead overall, I'd still rather have the X1650XT if choosing between the two as they remained playable with the exact same settings.
A 7600GT would be a toss up for me though because no fsaa+HDR. I'd probably rather play Oblivion on the X850XT as HDR + jaggies drives me nuts so I'd want the better fsaa/bloom performer. Other people may not notice the jaggies and instead just go "oooh HDR pretty", making the 7600GT the obvious choice. But given games like SC
A, the 7600GT would still be my choice over a X850XT right now if I were buying. And I'd take the X1650XT over both of those, which in the USA at least is priced real good at the moment. Anyway, no right/wrong answer really as they all perform about the same. I don't care to play SC
A, but it does have me bothered that PS2.0 support is already being dropped as I have 4 - X8xx series cards that I had hoped to keep using for a couple more years. (X800XTpe, AIW X800XT, X800XL, X800 128MB). To be honest, I now plan on getting rid of the slowest two as to not have too many PS2.0 only cards around.