Seems that there is every opinion under the sun here, so take your pick
To answer your question directly, you will notice a vast speed difference between the 500MHz iBook and it's 66MHz system bus and the 500MHz TiBook and its 100MHz system bus. Also, I have disovered more and more that when Altivec comes into play, you see further speed advantages. I LOVE the larger screen on my TiBook AND I really like the fact that I can use a second monitor on it for more screen space.
I have to say, however, that I have been wishing I could upgrade to the new TiBook like people here recommend. However, there is no way that I am going to be able to spend $3200+ on a new laptop. I really had to scrape to get the $2100 for my 400MHz TiBook a year ago.
Also, if you go out and spend the money for the newest technology, you WILL end up losing a LOT of cash very quickly. Just be aware of that, regardless of what you decide.
If you CAN make the iBook to TiBook transition for $500, I say go for it. However, if you can get something with better graphics, it'll really help considering the specs on the upcoming OS X.2 release.