I don't think the extra internal storage is a significant factor. I have a shelfload of books in my 500, at least 3 months' worth of reading. I can't imagine needing more storage, but if I do then it's easy to pop in my $10 1GB SD card.
OTOH, the other differences make it an easy choice to go with the 505 for an extra $20.
Personally, although I'd like a 2nd Reader for my SO, I have a hard time considering one for even $180 after getting mine from the $60 deal.