Sorry for the delayed response, but I wanted to be as objective as possible and give you the best advice I could. Also all this takes a lot of time.
I did some research and I also asked around as promised and here is what I can tell you:
The consensus amongst all the pros (myself excluded) is that your price is your limited factor. The truth is that $500 does not buy you much of a DSLR. The ones that you are looking at are going to be seven years long within a few months. This is a very long time when it comes to cameras, probably something like 40-50 years in car technology terms. Even with that, you are looking at the cheapest and most basic models that were available at the time, so they are even more obsolete now.
I was right when I suspected that everyone I know would try to steer you to go with advanced cameras. See, the reason the pros use DSLR's is for the quality of the pictures that the sensors produce. This is somewhat irrelevant though, because:
1. I dont know if you are old enough to remember film days, any of the cameras that you see recommended below would produce better images than film.
2. Sensor isnt only limiting factor when it comes to picture quality. It also depends on the quality of lens you put in front of it. Kit lenses for DSLR's are the lowest quality lenses you can buy. Do not underestimate the importance of using high quality lenses and how this contributes to the quality of images.
3. In reality, you start seeing difference in quality between images taken with advanced amateur cameras and DSLR's at sizes larger than 8X10. How many pictures do you have in your house that are bigger than 11X14? Yes, that is inches. At that size, you will need a magnifying glass to see the difference between DSLR and advanced amateur. If you want to enlarge to lets say 30X50, the difference would be more than obvious. Depending on the camera, the quality of pix that comes out of the latest advanced cameras, would be better than that of an old DSLR.
4. The lenses on the advanced cameras are usually top notch quality. You are mitigating the "kit lens factor" ie its like using expensive lenses which contributes greatly to the quality of the image. You will need to buy three different lenses for the DSLR to cover the range the advanced cameras cover.
5. Any advanced amateur camera will shoot HD video these days, so you are getting two cameras in one package.
6. The "pros" do not use cheap DSLR's. Their DSLRS have advanced features (but not all) that the advanced amateur cameras have. Such as: ability to do high speed shooting. This is what it means: If you have high-speed subjects, such as racing cars, kids playing games, sporting events, your camera needs to be able to focus really fast and then be able to take many pictures in no time. Then you choose the best one. The advanced cameras have so many features that would allow you to capture variety of images that the cheap DSLRs wouldnt. IMHO it is better to get an image even if it is not "pro" quality, rather than miss one just because your camera cannot capture it.
7. Articulating screen: important when you shoot over crowds, fences, very close to the ground, or just want to be discrete.
The list goes on and on and on.
Here are some suggestions put together from "worst to best":
Canon
http://www.dpreview.com/products/canon/compacts/canon_g1x
Well respected camera amongst people that like to put a camera in their shirt pocket. Lens has very limited zoom range. Accessory lenses exist, but they are not top glass and quality of image deteriorates significantly. Not as robust featurewise as the advanced amateur cameras.
Here is its Nikon equivalent. Same could be said about it, the one from Canon is much better.
http://www.dpreview.com/products/nikon/compacts/nikon_cpp7100
This is the type of camera everyone thinks would fit your needs:
Starting with this model:
http://www.dpreview.com/products/fujifilm/compacts/fujifilm_hs30exr
Very solid performer with a variety of high-end controls.
Its Panasonic equivalent:
http://www.dpreview.com/previews/panasonic-lumix-dmc-fz200/
Climbing up the ladder of quality and robustness, here is a nice camera from Canon:
http://www.dpreview.com/products/canon/compacts/canon_sx40hs
These two are only marginally better than it:
http://www.dpreview.com/products/fujifilm/compacts/fujifilm_xs1
http://www.dpreview.com/products/panasonic/compacts/panasonic_dmcfz150
Do not underestimate the Panasonics and Fuji's. They are emerging players in the field that have been slowly but steadily carving out marketshare from Canon and Nikon.
This is the one that came most recommended by pretty much everyone:
http://www.dpreview.com/reviews/sony-cyber-shot-dsc-hx200v/9
There is no one, absolutely no one in the current market that implements live view better than Sony. Live view is the most important photographic tool that you can imagine. All others are literally light years behind. There is one particular case of live view that is of most importance: you can see the picture as it is going to be taken in real time when you underexpose or overexpose it. Google overexposure and underexposure as applied to photographic creativity and you will see what I mean. GPS, the camera will tell you where the picture was taken..etc, etc Also, Sony's are the easiest cameras to use.
Once again, when you read quality of pictures, keep in mind that you will start seeing the defects they are talking about at printed image sizes of above 8X10 and you will need magnifying glass to see them...
Get one of these, have fun with it, produce some good images, see which features you need and like most and in three or four years buy a "pro" DSLR for work. Don't worry, you will be able to capture great 11X14 that would sell like cakes if your images are interesting.
If you still think you are going to go with an old DSLR, let me know, I will help you understand which one has more essential features.
Hope this helps
Best
Boris
