Not sure if this is related at all, but I recently had an "Invalid Format Error" on my 505. It would hook up to the PC and the PC would see it just fine. I could transfer files to it, but when I disconnected the reader, I would see the "error" icon in the middle of the screen and "Invalid Format" at the bottom.
I found this thread:
https://www.mobileread.com/forums/showthread.php?t=16067
And followed the advice to hold the menu button down until the reader gave me the option to format the internal memory. I did that, it of course erased everything on my reader, but I reloaded my books and everything is now working fine.
Don't know if the option to reformat by holding down the menu button works on the 500 like it does on the 505, but it might be worth a shot.
Good luck--hope you get it figured out!
dordale