I had this exact same option just last week, Although the i7 was 150 cheaper here is how I made my decision.
i5 iMac:
Better GPU
3rd eSATA connector if I want to add a drive
Faster memory
i7 iMac:
Hyperthreading CPU (8 cores) usable for things like encoding/ripping etc..
Already own a 8 gig (4gx2) memory upgrade 1066 memory
I chose the i7 because my iMac is mainly used for running things like Handbrake, iMovie and a design software I use for work. All CPU intensive programs that take advantage of every core available. I don't game anymore so the GPU wasn't really a selling key for me and after testing it on a couple of older games like HL and WoW it's more than enough for anything I'd ever do.
The faster memory imo really won't be noticed considering I now have 12 gigs, since I already own the 8 gig kit vs having to buy a 1333 DDR3 set. The design software I use is for laying out floor joists and roof structures in homes so it eats up the CPU cycles and seems to take 8 to 9 gigs of memory when I use it.
The 3rd sata connector was almost the deciding factor until I put in the 12gigs of ram and setup everything the way I normally use it. With spaces enabled I open up what I need and pretty much have 4 or 6 desktops ready for use, I don't need to close programs to run another so load time is pretty much a non issue, not to mention once opened once they all open nearly instant anyhow.
With the memory taken into consideration and the 150 diff to begin with it was really a 300 swing so I went i7 for the Hyperthreading ability as that is used way more than the GPU will ever be.
Good luck with your decision!