One thing to note with that auction is that its got a Superdrive rather than the Combo drive that was standard on that model so its already a better buy. It is an outlet store so it won't be the end of the world to the seller if they have to relist, whoever's doing the listing is probably being payed to do it anyway. This really isn't a bad deal, its a good laptop from a good retailer.
The quote above for a "Refurbished MacBook 1.83GHz Intel Core Duo - White, 512MB memory, 60GB hard drive, Combo drive -- price: $799.00 w/Free Shipping" direct from Apple is for the Core Duo version and is without a superdrive. This model is newer, is Core 2 Duo (faster and 64 bit if you care about such things) and has a Superdrive. Admittedly it'll have slightly less time left on the Applecare but it'll only be a few months worth of difference and you'll still be able to extend the Applecare.
The model you've won on auction is very comparable to the current base model MacBook. Yes it has a slightly slower CPU, however, to make up for it, it has a Superdrive.
Edit: Whatever you do, please, for the love of all that is good and holy in this world, don't do this again and if you do bail on the deal, make sure you realise how naughty you've been and tell all your friends never to make the same mistake again. As you have probably gathered, people *hate* this kind of stuff. I've got a ton of stuff that I'll be flogging on eBay next week. Some items are big and get in the way and I need them shot by the end of term when I'll be moving everything back home. I can't take this stuff with me so if someone like you does this to me then I'll be in a real mess and incredibly angry.
Edit 2: That $999 model you've found on eBay doesn't have the Superdrive either. In a laptop a superdrive is probably worth roughly an extra $50. So basically you're getting a $1050 worth model for $850. Sounds like a good deal to me.