Depends on the games you intend to play. The A500 is better suitable for old games since not every game will work on the A1200, which is THE computer to have for (example) AGA games. Add some nifty hardware and you'll get a machine that can handle somewhat modern 3D games too, like Quake.
Note though, that the A500 doesn't have a harddrive so the A1200 is also better suited for large games that can be installed onto the HDD or WHDLoad'ed.
