I am not sure if you guys missed the point or me?
The A500 came as standard with 512K of RAM. But, and this is the crux of the matter, it was CHIP ram. This memory was used both by the applications (i.e. the CPU) AND by the graphics and sound chips (Blitter etc). This meant that each had to wait for the other to finish before it could access memory.
However, if you added another 512K, this was FAST memory and was only available by the CPU. If you look at the difference in something like F/A18 Interceptor (anyone manage to sink the submarine?), you will see that with 512K fast ram, the game is much faster/smoother as the cpu doesnt have to wait any more as it has direct access to a WHOLE 512k (FAST) memory, rather than having to SHARE 512K (CHIP) memory with all the other custom chips.
If you want a better explanation of this architecture and how it works, gimme a shout because there is better explanation in the "Amiga Hardware" book (blue Abacus book).
:-)