Strongly advise against XP if you're going to be using 8gb. 32-bit XP (or Vista, or any 32-bit OS) can only address around 3.2gb max and any single process (we'll call it program for simplicity) can only use a max of 2gb. The system would work fine, but obviously you'd be missing more than half your RAM. Really you'll need a 64-bit operating system to use more than 3.2gb, and WinXP x64 isn't really that good for home use, unless the devices are very common and have regular driver updates. Your only realistic choice is Vista x64 (dual-booting with 32-bit XP for compatibility if you must) and it is rapidly becoming the norm, so just get that instead.
I know the temptation with buying 8gb RAM while it's so cheap. You'll want it eventually, and prices are starting to edge back up again, and I can't see them being this cheap for a while. Got 8gb sitting in my system I'm waiting to finish off.
If it's a gaming machine dump the 8600. It's utter @#$%& for the money. Get a HD3850 (512mb ones are great and easily the sweet spot for value at the moment), HD3870 or a 8800GT (256mb one is a bit crap) if you're somewhat bemusedly determined to stick to NVIDIA.
Dump that PSU. It won't last 5 months with that system, and will probably take out the rest of it when it does go. Get something from Seasonic, FSP the Corsair 520W or maybe Enermax if you're really pushed for choice.
Don't go "blah blah blah" with the monitor, keyboard and mouse. They're the most important part of your system so do some research. You don't need to spend a fortune to get best for your use, so just have a look around, test some in person if you can, and make a reasoned choice rather than just getting the cheapest.