NetDoc...
I have the setup you are talking about. I originally had the S400 and added the S500 in April of this year just to have 1 more megapixel.
There are good & bad things about this setup. I'll start with the bad first since I think the good outweigh them for what I was looking for.
Bad...
No control over most settings. Even in manual mode, we can only control ISO/White Balance/exposure&focus area.
We can't control Shutter speed or F-Stops and we don't have a manual focus. You'll see some of the shots the Olympus people take and they are outstanding. We may not get the same thing since they can control most aspects of their camera.
The LCD is a bit small to verify good focus after the shot is taken.
Proprietary battery.. (I'd rather have AA) --- I get 2 dives out of a charge if I have it set to turn off the LCD after 1 minute of no use..(usually 60 shots or so between the 2 dives)
Good
Not many settings. We can set it and point-n-shoot. I don't think much about my shots, I just take them.
Small size. This was my main thing. I wanted a camera my wife could carry when she wanted one and then I could take diving. This is the smallest setup you can really get.
Ease of use. Point, half-press to get a focus lock and then press the rest of the way. Too easy. No thought involved.
Zoom..Some of the other digitals in this price range don't have a zoom. This is great for both creatures that didn't come close(whale shark in my case) or for small creatures(blennies)
My setup is usually the smallest on any trip I've taken. I actually worry about it getting smashed in the camera tank after dives, but that hasn't happened yet. It's so easy to setup and use that I can just enjoy my dive and take a shot or two when I see something. It also packs into a small Pelican case that is easy to carry-on as your 2nd bag.
I also have the Sea&Sea YS25-DX and if I was doing it again, I'd get the YS90-DX instead for a bit more light.
All-in-all I'm very happy with this setup, even though I get envious of some of the shots I see from the Oly people. But, most of then also know what the heck a f-stop means and I'm basically clueless. I'd have to learn a lot before I could match their shots, even if I had their camera setup.
Good luck with your choice, but I don't regret getting the S500/WP-DC800.
Here's some samples...
Flower Gardens - 2004
http://www.photo.net/photodb/folder?folder_id=411109
Guanaja - 2004
http://www.photo.net/photodb/folder?folder_id=400065
Cozumel - 2003
http://www.photo.net/photodb/folder?folder_id=356678
Isla Mujeres
http://www.photo.net/photodb/folder?folder_id=317259
Flower Gardens - 2003
http://www.photo.net/photodb/folder?folder_id=321273