Well, where to start.
Why get PvP gear if you want to do PvE? They will /laugh to ya if you're gonna do Arena in the outfit you got now and it will take you ages to gear up through Aerena's. If you like PvP, go and do some BG's to get honour for some PvP-gear. Or Wintergrasp fights.
So if you wanna go PvE, wich gear is easyer to get than PvP gear, go and do new ICC-5-man runs as you said. But watch out, your gear is official too low to do these new instances, so get your guildy's to drag you through. I think if you're gonna pugg these instances, your group will not be happy with your low DPS.
So preferably you can go for ToC-normal (and HC), there drops good 200/219 gear for you. You can farm ToC-normal by doing it over and over.
Your spec looks good, just make sure you're priority is: Spellpower, Haste, Crit, Spirit. Haste is very good for Arcane Mage. Try to aim for at least 500/600 haste. (ToC-normal drops nice trincket wich gives 84 haste + SP-proc, called Abyss Rune)
Also aim for about 2500 Spellpower and about 300 hit.
Get your reputation for the Head enchant and Shoulder enchant. Kirin Tor-rep is what you want.
Go do ********* of HC's, cuz they drop Emblem of Triumph wich can provide you eventually with full T9-set. (these emblems you can trade for reputation as well these days)
And about the knife + offhand or Staff choice, just see what better at the moment for you. Grab everything you can is my advise :) If you're looking at the best DPS possible in game, usually a knife + offhand win the race... But personally I love Staffs, so as soon as I can get one I take it, and will only put it off if I get a better combo.