Funny, I was looking at the same two cameras, ended up going with the S500. The key thing for me is that the S500 is truly pocketable. The small difference in size makes a huge difference in practice. The fact that the camera fits unobtrusively in my pocket means I can take pictures when the opportunity arises. At my skill level that's more important than the bells and whistles.

Hey, I just picked up the 7.1 megapixel Japanese model, the IXY 600, in Akihabara last week (aka the SD500 in North America). Your analysis still applies on this model though; the lack of a battery indicator is a huge PITA, and the auto-rotate feature a big time saver. I also like the battery charger which is much easier to carry around than the power cord and transformer in my ancient Powershot G3. The startup time - a measly 0.8 seconds - is also impressive.