The A500 definitely has the best photo quality of Sony's sub-$1,000 dSLR crew, with the best color reproduction, and it holds up pretty well against the competition, too.
Overall, the A500's noise reduction fares pretty well at midrange ISOs, though it still can't top that of the class-leading Pentax K-x. You can start seeing a little bit of detail degradation at ISO 800, but it's not bad through ISO 1,600. After that, the quality degrades visibly.
You can probably eke a stop out of the A500 by shooting raw and not relying on the in-camera noise reduction; as is true of its generation of Sony dSLRs, the in-camera noise reduction isn't very good. This is a quick-and-dirty version processed in Adobe Camera Raw.
As you can see, by ISO 6400 there's not much you can do about the inherent noise in the photos except change your tradeoffs. But if you're going to use the images scaled down, they still look pretty good.
(Top JPEG, bottom Raw. 1/60 sec, f5, spot meter, AWB, ISO 6400, 18-55mm lens at 18mm. ACR defaults plus Luminance NR 30, Luminance Detail 1, Color NR 35, Color Detail 50)
Lens sharpness from a distance (as opposed to close up, like the previous shot) is OK, but not quite as good as I'd like.
(1/400 sec, f13, evaluative metering, AWB, Standard Creative Style, 18-55mm lens at 55mm)
Surprisingly The A500's JPEG color accuracy is a lot better than most of Sony's other consumer dSLRs, though like its siblings, the camera doesn't offer a natural/accurate color mode or a way to strip out all the color "enhancement" for JPEGs.
I'm not sure what the actual algorithmic differences are between the A550 and A500's color handling, but the A500 renders significantly more accurate colors. Look at the purple flower (pink for the A550!) and the various reds. The A500's exposure is slightly darker, but that doesn't account for the hue shifts.