The O.P didn't say what levels he'd have to spend miles at to get the $500 in exchange, but I assume he has the freedom to do it selectively and applies it only at standard domestic awards, or 25K miles. That would be effectively selling miles at 2 cents each (if you had to go to "Rule Buster" at 50K it'd be selling at 1 cents each).

Even though my own mileage valuation when deciding on mileage runs is 1.5 cents, I'd be hesitant to sell the miles for 2 cents cash unless I had an awful lot of them and didn't have good prospects for burning them off in the next 5 years (i.e. early in career, limited vacation time for years to come, etc.) If you have a lot more miles than time, it makes sense to offload some for cash rather than let them get devalued (all the sale/barter rules notwithstanding).

On upgrades vs. free travel, it's not cut and dried. I'm 100% on the free-travel side (upgrades are awfully nice, but have never spent miles for them). Sometimes you can do well on the free-travel side. In March, for example, I'll be heading to Majuro and Yap (out of Manila) as a sidetrip on a 25K Continental award. Will be in Yap for Yap Day. The paid ticket for that would have been very expensive. If your goal is to see a lot of the world, then there are possibilities with various alliances for free tickets at award costs that look appealing compared to paid tickets.