The paradigm of integrated sensing and communication (ISAC) is envisioned as a key enabler for the evolution of 6G, leveraging inherent similarities of dual functions in hardware architectures and signal processing to sense the environment and send messages via a shared waveform. In this paper, we establish a theoretical framework to evaluate the sensing and communication (S&C) performance of bistatic ISAC systems under Gaussian fading channels at finite blocklength, where a primary focus lies in uncovering the fundamental tradeoff between dual functions due to limited resources. In particular, we first formulate the joint S&C problem in bistatic single-input and single-output (SISO) ISAC systems, and define the rate-error tradeoff to quantify the performance balance between S&C. Then we derive the achievability and converse bounds for the rate-error tradeoff, providing a deep comprehension of the interplay between S&C functions. Finally, we discuss the extensions of our framework involving infinite blocklength regime, general parameter estimation and multiple-input and multiple-output (MIMO) channel.