what are you actually using it for? if you need to do anything at all to do with games, the 8500 is rubbish but I would assume not, so yes that looks fine, very fast for general use, and I think substantially faster than the other one (the build will be more effort of course...)
I wouldn't go with the system from costco, you will probably be better off with building your own system. At least with the custom build you can overclock
For general use/movies that'd be fine. However for gaming it is sorely lacking due to the 8500gt which is a rather terrible excuse for a GPU. What's your current setup and why do you want to upgrade?