I had the same CPU for a while and it performed extremely well. Mine ran in conjunction with an ATI 4870x2. This is pure conjecture but I believe the 4870x2 is probably more powerful than a 560 Ti or 6950 (albeit incapable of DX11 graphics). I saw no signs of CPU bottlenecking, confirming my general belief that provided you have a moderately capable CPU, the bottleneck in games is almost always the GPU. As others have said, the Wolfdale Duos also overclock very well.
Bear in mind that the main benefit of getting a good GPU like a 560 Ti or a 6950 is that it allows you to crank up the eye candy. This has no implication for the CPU at all - eg cranking up AA, AF or tessellation requires more GPU power but not more CPU power.
Another thing to bear in mind when considering a CPU/GPU combo is this: most PC games are developed to run on consoles. The current generation of consoles have far less CPU and GPU power than modern PCs. If you take a PC game, you can make it fit the lower graphical capability of a console by cranking down the resolution and effects. However, the CPU power is more about the game engine, artificial intelligence and basic geometry. These are fundamental to the game and have to be roughly the same in the PC and console versions if the game play is to be kept equivalent. To put it another way, there is no way to make the game fit a lower CPU spec without fundamentally changing the game.
This means that if the game will run on a console, then its CPU capability requirements will seldom be much more than the PC CPUs that were around at the time. The E8400 is a high end version of the core 2 duo that was released a year or so after the current range of consoles were launched, so it's fair to say that it can take more or less any game you throw at it. As an aside, gaming enthusiasts will be hoping that the next generation of consoles ships with substantially more CPU power. Hopefully then, games will start to get a bit more interesting and intricate. Games are all a bit same-same these days IMHO.
As other have noted, I would sincerely wait for the mid-range 6 series nVidia GPUs to be released. The AMD 7950 is the successor to the 6950 but is priced very much as a high end part.