Definitely an upgrade and a pretty hefty one at that.
The PIII 500MHz with 512K L2 cache would be based on the older Katmai core. The newer 1GHz PIII would be based on the ore recent Coppermine core.
Despite the sammer cache the Coppermine is considerably faster even at identical clockspeeds.
The primary difference between the two cores being the Katmai had 512KB off-die L2 cache operating at half the clockspeed of the processor... which in the 500MHz PIII meant 250MHz cache.
The Coppermine's L2 cache is on-die and operates at the full clockspeed of the processor, meaning 1GHz with the PIII 1GHz. The L2 cache bus width was also quadrupled from 64bits to 256bits in the Coppermine, giving 4X the effective bandwidth even if the cache was clocked the same. It's also 8way set associative compared to the 4-way set associative cache on the Katmai... this is getting a little more in-depth though.
There were a few other very minor changes, but that was the primary factor and one that boosted performance by quite a bit.
To put it into comparison, the Celeron with a mere 128KB of on-die L2 cache would generally outperform the PII/PIII by a very miniscule amount when the both operated at the same clockspeed/FSB.
In short, despite having less cache it's quite a bit faster.
As for the PIII 500MHz.... it's not really worth much nowadays. It's pretty old and relatively slow by modern standards.
You might be able to find someone with an older Slot1 motherboard that's incompatible with the Coppermine and might be interested..... I doubt you'd get much for it though.