Yeah, you are probably right. You could actually get away with a 7600GT or X1650 and save yourself 50 bucks. My only concern with the 8600GT is that there is no gauruntee of how it will handle DX10 games. I mean yes it's DX10 compatible, but will it really have the horsepower to run those games even at lower resolutions?
What I would do: By yourself a $100 7600GT and wait and see how DX10 plays out with the current cards. You may end up paying more money, but you won't kick yourself if the 8600 flops with DX10.