My two cents:
While anything is likely to be an upgrade to an 8400GS

, the 8600GT isn't much of a performer. I'd agree with Mace - the new 9600GT is a much better value, but from what I've seen the 8600GT is roughly half to two-thirds the cost of a 9600GT. So if you do go the 9600GT route, it won't be as cheep as you'd probably like. The real killer for the 8600GT is it's diminutive 128-bit memory interface. Because of that, and the fact that the different flavors of the card don't scale their RAM speeds all that much, getting the 512 MB version of the 8600GT still isn't likely to help you very much.
The 9600GT has double the memory interface width, at least as much ram as any 8600GT you can get your hands on (and double that of most of them), faster ram speeds, and a newer, faster GPU. All in all, it's the best budget gamer's video card in the Nvidia camp right now and the direction I'd go in if I decided to go the Nvidia route. If you really can't afford anything more than an 8600GT right now, I'd say sock away that money, add to it over time, and get yourself something nicer in another month or two.
Again, just my two cents;

-Caz1