At the $500 range, you should be able to find some good deals on the IBM Thinkpad R52/R51/R50, either new or used. In the US, the R52 has been dropped from the line, in favor for the R60, but you should still be able to find new-in-box units from resellers/retailers, and there are plenty of Thinkpads in the 2nd hand market.
These are solid reliable laptops. For the R52, expect a Pentium M processor at around 1.8Ghz, 512-1GB of RAM, 40-60GB of HDD, and a 14"-15" LCD. Most lower-end models have integrated graphics, though, so don't expect too much from Vista Aero. The higher-end models should run Aero with no problem though. This model has all of the nice Thinkpad features: motion sensor that locks your hard drive if you drop the laptop, trackpad + touchpoint, factory pre-installed system recovery software in a hidden drive partition, great keyboard. Some models will have a fingerprint scanner, which I think is completely useless.
You might also be interested in the R52e, which is a budget version of the R52 that doesn't contain a trackpad. The R52 is about 1/1.5 generations behind the current generation R60 (which contains Core Duo/Core 2 Duo processors). It's one generation above the R40, which contains Pentium M processors in the 1.3Ghz range, but has pretty much the same feature-set and can be had at even better prices than R52s. I wouldn't go any lower than the R40 - the R30, which contains <1Ghz Celerons only USB1 ports (no USB2).
The R-series will contain better deals than the T-series, which is aimed at business users and is thinner and more expensive.
Disclaimer: I'm typing this on a 2nd hand Thinkpad R52 which I got for $550 about a year ago, which I loaded up with 1.5GB of RAM and a 160GB HDD which I got for an additional $210. I've been using Thinkpads almost exclusively for the past 10 years.