I7 860 4 or 8 cores ?

^exactly. The technology is called "hyperthreading." Intel uses it in order to try to increase multi-threaded performance on a single CPU core.

Never heard of a game like that before. But if you can set the number of cores, than it sounds like it would make good use of multi-threading.
In folding@home benchmarks, the i7 performed best with 8 threads over 4 threads, so I would say set it to 8 for tasks if you can.

keep ARMA at 4 cores, sounds like it hyperthreading causes some issues (which is not uncommon in games)

There's no performance difference with Hyperthreading enabled or disabled in any game when paired with any graphics card with one GPU. I haven't seen benchmarks with SLI/Crossfire or cards like the HD5970 (basically Crossfire) comparing Hyperthreading On and OFF as well as overclocking.

Again, you can disable Hyperthreading and use stock frequences for your CPU with no game performance difference as the graphics card will be the limiting factor.

The i7-860 uses between 30% and 60% for games (it varies) while an HD5870 graphics card would be maxed out most of the time or close to it. It's best to test with VSYNC off and set the graphics so it's averaging at least 65FPS then turn it ON again (so you can get 60FPS with no screen tearing.)

FYI, with Hyperthreading enabled the CPU usage isn't accurate. It averages all eight threads as being equal. It is more accurate with Hyperthreading disabled.

I do use Hyperthreading with video encoding and have actually used all EIGHT threads.

Apparently there are games that work better with hyperthreading disabled but since this CPU can handle much better than any single-GPU card can dish out it's a non-issue. If you have a high-end SLI or Crossfire setup you may wish to experiment with enabling/disabling Hyperthreading as well as overclocking.

Overclocking the CPU:
It's a waste of time in most cases and just adds heat (thus fan noise). Monitor your CPU with the Task Manager (CTRL-ALT-DEL). You need at least one core to reach 100% before there's even a chance that overclocking will make a difference.