1: Windows 8 is pretty much a gimmick, uncomplete operating system, just like Vista was. It's like your phone had a giant monitor, but no actual phone parts.
2: Windows 7 works pretty damn well, and XP era games are just fine on it.
3: Using windows XP with any games from say, 2010+ is not going to go so well for you, since most of them are are built for the more up to date windows 7. Expect memory leaks, crashes, freezes, and so on when playing newer games.
4: A 500w PSU is weak as hell for a gaming rig. I sincerely recommend 750w or higher.
This is my current rig of nearly 3 years, and while it cost me nearly $1,900 at first (That's including the case and monitor, expensive), you can get the same setup, sans the monitor and case, for ~$700 dollars now?
Don't listen to the Nvidia hate either.
If I can convince you to do anything though, it would be to get a bigger PSU.
