When you say "the prompt says I'm running RedHat on i686", I think that prompt is generated by the linux_logo program. If it is, then that program gets that info from /proc/cpuinfo, so check that file out to see what the kernel thinks your arch is.
Otherwise, if that bit of info isn't coming from linux_logo (you can run the program manually, usually, to see what it's reporting), it might be what all the RedHat packages were compiled for, which is i686 (Pentium Pro). Any processor from the PPro up (PPro, P2, P3, P4, K6-2 (I think), K6-3 (I think), Athlon, Duron, and Athlon XP/MP, for now) will work with programs compiled for the i686. And you don't see a gigantic increase compiling for your specific processor (you do see some, but it's not as much as if the packages were compiled for i586 -- Pentium classic -- instead). So RH goes with a good bit of compatibility, and a good bit of speed.
All that having been said, yeah, if it works, leave it.