Graphics Card Upgrade Question

So I recently built a new machine after my old one of about 5 years died (motherboard died).

I have an Intel Mobo h67 chipset.
I chose a Pentium g860 (Dual Core 3ghz) for now to keep cost down (will be jumping to i7 eventually).
8gb ram.
Win7 64bit.
600w psu.

Now heres the thing... I made a newb mistake and didnt research much into modern graphics cards. I had an old one (maybe 3 yrs) in my old machine and I figured I could just use it. It is an evga GeForce 8500 gt...

Well when i tried some games(arma2 planetside2 AoC) on my pc and they ran like s**t, I looked up some benchmarks and lets just say the 8500 gt is not top of the line.

So my first question..Is it safe to say my 8500gt is bottlenecking my performance?

And given the rest of my specs, if I were to upgrade to maybe a HD 7850 or GeForce 650 ti (both options to keep a lower budget), how would it handle games like Arma 2, Planetside 2, or even far cry 3?