Why can't I make the partition use the full 500 GB availiable?
Disk utility can't grow partition boundaries upwards.  If the free space and partition were reversed, with the free space below the partition, then you could expand the partition into it.

One workaround is to boot with the OS X DVD, use Disk Utility to create a partition image on a USB drive, then write that image back to the free space.  Once you've verified that it works and runs, delete the bottom partition, and then expand the new top partition into the free space below.