I recommend spending the extra $10 for the i5-3570k. Per clock, the ivy bridge series is about 5% faster than the sandy bridge. Pair that up with the AsRock Extreme 4 Z77 mobo (~$135), and you'll have a better system.
For RAM, consider these low profile RAM, so you can fit it under the CPU cooler. They are also slightly cheaper.
If you can wait a couple more days, the gtx 660ti is due for release on the 16th of this month. It should be in your budget and is rumored to be a strong performer. Quite possibly better than the hd 7870. With this build, you'll easily be able to run most games on ultra settings at nearly a constant 60 fps.
You can OC pretty well up to around 4.2 to 4.3 Ghz. There are notable heat concerns when you start messing around with voltages on the Ivy Bridge chips, but its not a significant disadvantage since the Ivy Bridge is faster per clock value compared to Sandy Bridge.
The game performance depends more on the GPU, and yes, you'll run most games on ultra or high.