An i5 is less powerful than an i7 but it is by no means a weak CPU. Just check around the internet and notice the amount of people that have/want/suggest the i5 2500k. If the purpose is heavy work (video encoding stuff like that) then an i7 could do it better than an i5. Still in mostly every situation the i5 is more than enough
I think he may actually be talking about the mobile editions of the i5/i7, since he mentioned getting an Nvidia 650m. If this is the case, then know that all mobile i5s are dual-cores, and not quite as stalwart as their desktop counterparts (I'm currently working with an i5-2410m).
But that doesn't mean they're bad processors. My 2410m combined with Intel HD3000 runs most games at low settings @ 1366x768. My friend's 2410m combined with a GT550m runs most games at high/ultra settings (no AA) at 1366x768.
The i5 is fine for laptop gaming - don't sacrifice the GPU to get an i7. The i5 will likely show its age a bit sooner than the i7, but the i7 won't have much more time over it.
In terms of gaming, there is no need to go with i7, the i5 is just plenty....i don't know much about the 650m actually but never judge a GPU by its Ram...so my advice go with i5 and get a better equipped laptop, something with a gtx 660M