Definitely doable. I linked you to my thread about overclocking the NVS 140M Mine is overclocked 70% and it's completely stable in 3DMark06. With the overclock, it's on par with an 8600M GS, meaning that most games are quite playable at moderate resolutions of 1280x800 or 1440x900. Temperatures are also remarkably cool even when overclocked.
Link to NVS 140M OC thread
EDIT: It looks like the newer NVS 160M is actually a
downgrade from the NVS 140M, since the 160M has half as many stream processors (8 vs 16) and is clocked higher from the factory to compensate. This probably reduces it's overclocking ability quite a bit, so I'd definitely read up on some forum posts to see what people have been able to reach with their 160Ms.
My 140M is clocked at 400 Core/600 RAM from the factory. Its maximum stable overclock is 680 Core/1025 RAM.
In contrast, the NVS 160M is clocked at 580 Core/700RAM to start with, so I'm not sure how much headroom you've got. The other BIG difference is that the NVS 160Ms in some Dells are DDR2 instead of DDR3 in the 140M, which again reduces overclocking potential.
Overclocked or not though, that Dell is one heck of a deal and I'd definitely go for it.