Are you going to over clock the CPU? IMO having a cpu running at least 3 GHz is the sweet spot in regards to gaming. A quad is nice but unless you are going to overclock the dual core e8400 will give you a better gaming experience. But I know the price for that quad is hard to resist.
It's not the .16 ghz that makes the E8500 nice, but the extra 0.5 multiplier. I agree that the sweet spot in that end is the E8400, hence why I got one, but some people have found the E8500 for as little as $10-20 more and it's worth it to them