What I am trying to do is to connect an A500 PSU to a CD32. Should I connect the Sheilding?
No, don't bother it will make absolutely no difference.
Incidentally, that CD32 power adapte on ebay, I made one for 1.50 UKP all in, 1.00 UKP for the Y-cable and 0.5 UKP for the 4 pin DIN plug, both easily available.
Just check you have the right voltages on the right pins before plugging into the CD32, $5 on a cheap multimeter saves a CD32!