For portraits on a crop camera, the 85 f/1.8 sounds like a good choice. It's more than two stops faster than the 70-200 f/4, which will help you with subject isolation and in dimly lit rooms. So unless you have a use for the 100 - 200 mm range, I think that the 85 will be just right for you.
Also, there is nothing wrong with having fast and sharp primes with focal lengths that are already covered by a slower (and less sharp) zoom.
70-200/4L has different applications from the 85/1.8. Both are excellent lenses.
I would say get both eventually, depending on your need for longer focal length during the day time and affordability. You'll have a wider range of opportunities with 17-85, 70-200/4, 50/1.8, and 85/1.8.
For portraits, there is no question (for me) you want the 85/1.8. You can get a great bokeh if you want, and close it up for when you want more DOF. The 85 is a great length on a cropper for portraits.
I very rarely use the 70-200 for portraits. If I had a full frame and the 2.8, that might be a different story.
My logic on lenses is the slow 17-85 zoom, with 1.8 primes at 20, 50, and 85. Perhaps will add a 24/1.4 soon. Primes and zooms do different things.
The 85 on your XTI turns out to be 136mm with the crop factor. On a full frame 135mm is a very popular and sweet lens to have especially for portraits. From what I've see the 85 f/1.8 can't be beat especially for the price. The bokeh is super smooth and you can't beat the f/1.8 for low lighting and subject isolation. This lens was definitely on my short list back before I had to liquidate my gear a couple years back.
I say go for the 85 without a doubt especially with that great price and don't look back.
The 70-200 lenses really excel at portraits as well as the 85f1.8. Ultimately you can't go wrong with either although IMHO the 70-200 gives you some additional shooting options.
