Hi,
it would be much cheaper to use an A2000 for this purpose.
I also use an old A2000 as game-console. I've bought simple extension cables for the keyboard and the joysticks and a trackball to replace the mouse. The HDD is a VERY old 20 MB (!) MFM-Disk at an OMTI-controller and the A.L.F. hardware-adapter using the A.L.F. software.
It works really great and was very cheap (less than 50,- EUR for all).
The HDD-solutions for the A500 are quite expensive (compared to a cheap A2000-controller) and placing an A500 into a new case and using an external keyboard would require a lot of work or very much money.
Noster