I personally recommend Fedora for it being the most cutting edge distro which is (almost always) stable. You keep getting new kernels and graphics stacks while having very little breakage; I've never used Arch long-term, but I've heard that even if it's easy in the beginning it eventually gets to be a leaning tower of cludges. Eventually something goes wrong and you end up re-installing anyway, despite what the Arch forum types say (I've found them to be quite elitist, though their wiki is the best of its kind).
I'm using Fedora 19 XFCE, and I get awesome performance (with highest settings) on pretty much any native game even though my computer is five years old. You've got to make sure not to use GNOME though, unless you've a real power-house graphics card it wont fly without turning your game's settings down-- I also have an i7 (the original one) but GNOME is a huge performance killer.
If you pick Fedora, the not-too-well-advertised steam repo is http://spot.fedorapeople.org/steam/steam.repo, just add this to your repos folder and
will get you it. You'll need to make sure to get the 32bit libraries for your graphics card though, instructions are here: http://rpmfusion.org/Howto/nVidia (even though it says nVidia, you can just change the nvidia package names to the AMD ones and it works).
su -c 'yum install steam'