My friends have it on their sub-$1000 laptops and they say it runs very well. Hardcore gaming isn't really Vista's forte on laptops. But, if you aren't transcoding high definition video, I wouldn't think it'd matter. I couldn't care less over which, (XP or Vista). They both have their plusses. Vista molds to what you do and pre-caches some of the more frequently used files and applications. The biggest problem I see is hard drive usage. I think a minimum installation can go upwards of 10 gigs (?). By the way, Vista Ultimate is 64-bit instead of the 32-bit, so it uses memory smarter. That's the best way I can describe it. It goes faster, is what I am trying to say.
The cheaper one does look like your best bet. It's odd. I don't buy laptops seriously anymore, though, so don't take it from me. If I had a similar budget, I'd get this:
azon.com: Sony Vaio VGN-UX380N
I'm freakin' weird like that, though.