It's the chipset, in particular, the core architecture of the GPU. G92, More efficient, a chipset you might expect in a 9 series card, alas nvidia has decided against their normal template.
the 8600gt has 32 shaders while the 8800GTS has 112 shaders. The 8800GTS uses 320bit memory interface whie the 8600gt uses 128 bit. The 8600gt can OC, but it'll come no where near the 8800gts performance. Also, if you're going to get a 8600gt, make sure you get one with DDR3 memory, or else you won't be able to get far OCing the memory.
Uhh.. Yeah. You would be cutting it extremely short. Hey you can overclock that thing! If you can get it up to 2.2+, I would still consider the 3850. If you're allergic to overclocking, I suggest a new build! Wid a q6600, ana 8800gt, an everything!
You had me worried there. you're going to overclock then? you could go for one of those E2xx series chips.. If you're getting a fancy shmancy case, you could settle with a cheaper, plain one..
Keep an eye on the deals. a site like wiredDeals and slickdeals will keep you updated on the best of the best. I found an $220 8800gt on there acouple days after it was released, it was in stock, but I had no monies.