Use the A500 with extra ram and a harddisk and you have a very nice machine for games and utilities. Adding more stuff, like for example a turbocard and such, is imo a bit overdone.
As mentioned above, the A1200 is a much more capable machine, although without a videocard graphics are not a big improvement compared to your A500: on a 1084 you're still confined to the lower resolutions. Combined with a flickerfixer and a 15" CRT, you can use (much) higher resolutions, although the speed of the graphics subsystem is becoming a bottleneck for total systemperformance, even when using a fast turbocard. I like the improved image it gives me, although there are many Amigans who dislike the flickerfixers for A1200s as most (all?) of them do not display all colors the A1200 is capable of.
Use the A500 for what its good at in 2006: a very capable retro gamesmachine, with the capability of snooping around in 'the-good-old-days' insides of a classic OS. Adding both a hardddrive, extra ram and maybe an extra diskdrive (for diskcopying) will make your A500 a happy camper, adding more is not worth it and will most likely not give you the extra performance you expected.