How LONG do you intend to keep the PC?
I'd tend to suggest the i7-7700 (or i7-7700K if compatible motherboard that can overclock) if you can manage it even if the primary benefit is to allow you to keep the PC longer.
When I got my i7-3770K people said you "only need an i5-3570" but I've since been happy to do that as some games now run much better than they would, and in addition I feel no rush to upgrade thus saving me the cost of new motherboard, DDR4 system memory, CPU and reinstalling everything.
The "35%" or whatever above is very hard to apply to an actual game. The minimal FPS can be disproportionately affected when the CPU is a severe choke point so even if you get a 20% say FPS improvement on AVERAGE the experience may better than this might suggest.
*CLOCK SPEED is still king on average. The i7-7700 goes up to 4.2GHz, whereas the i5-7500 "only" goes up to 3.8GHz. So you're already 10% faster which can help even if you don't benefit from the hyperthreading.
SO...
At minimum I'd go for the i5-7500 (then try to adjust the BIOS so all cores run at the max turbo of 3.8GHz thus "x38" on the multipliers for 1,2,3,4-core turbo setup or however that works).
Long-term the i7 might be worth the investment. Some games are getting VERY, VERY DEMANDING of the CPU and that may increase in the future.