If you plan to overclock the i7 above 3.6ghz, you'll need a $80 air cooling solution. While the E8400@4ghz can get by with $20 - $40 cooling option. Something to consider.
Gaming wise, E8400 can perform near identical as i7 setup with single GPU system. Without knowing the rest of the build, that $280 can certainly help with another component.
watercooling setup, extremely nice case, powerful PSU, dedicated sound card, 24" LCD, maybe even those Nvidia 3D glasses. Who knows what esle you might want.