I know the system you are referring to - it is the Dell XPS-420 that has featured prominently on the HotUKDeals forum.
In my opinion it is an excellent system at a terrific price - you would struggle to get anything else from an OEM approaching it at that price, and I don't believe that you could self-build for that price, either.
As for the 512MB 8800GT, I have one in a very similarly specified home-built system and it is excellent. In terms of bang-per-buck it is the best of the 8800 series of graphics cards if you are gaming at a resolution over 1280x1024 and to spend £170 more to get a GTX is simply not worth it. I might be tempted toward the new 512MB 8800GT which costs about £40-£50 more than the 8800GT but as Dell don't offer that as an option on this model, then that is irrelevant.
Regarding 'waiting a while longer and get something better', you could do that for ever. Something better, cheaper, faster will always come along, that is the nature of PCs.
One word od caution about this (and other) Dell PC(s): Dell use a proprietary BTX format case, motherboard and PSU. They are very quiet and they run cool but it would be both difficult and expensive to upgrade these components at a later date.