The Core i7 has no advantage over the i5 for gaming purposes. The i7 has hyper-threading, an extra 2MB of L3 cache, and is clocked 100MHz higher. The 4 virtual cores and extra cache have no practical effect for gaming, and the slightly higher clock is nominal and not worth anything if you're planning to overclock. Which, coincidentally, you should be if you get a K-series CPU. If you don't want to overclock, get the cheaper non-K CPUs. Only get the i7 if you know you use a lot of highly threaded applications that will actually benefit from it (workstation apps, a lot of professional Photoshopping, etc.)
The new Core i5's and i7's overclock very well, though, so I recommend it. You can get 4GHz even with the stock cooler (long as your case has good airflow), and with an aftermarket you can hit 4.5+GHz. The higher clocks will have a much bigger effect than hyper-threading on gaming, as well as pretty much anything else that isn't highly threaded.
The integrated GPU in the AMD A8 should, in fact, run PSO2, though probably not at high resolutions/settings.
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