Hi Mason,
I will endeavor to explain what James meant to say
. One of the caveats that must accompany an underwater photography discussion now that we have entered the digital age is that just because a camera is the bee's knees for use topside or for portability doesn't mean it is well suited for this particular specialized application. Perhaps this should have been the first reply to your initial query rather than our usual immediate jump to our own favorite bit of technology (a common occurrence with us geeks!). With film cameras, you either chose a dedicated underwater point and shoot (Nikonos, Motomarine, etc.) or you chose a film SLR, which had manual controls for topside that worked just as well underwater. Now that digital point and shoot cameras have become much more capable than film ones ever were, and housings have become so inexpensive more caer ust be taken in equipment selection. In order to make the digicams more accessible and easier to use, maunfacturers have been making them smaller and more and more automatic -- this is particularly true with the cameras like the ELPH series which are marketed to an audience that values small size and ease of use. Remember, now, that the market for serious (and I use the term loosely to mean everything other than people who want to just point the camera at a fish and pull the trigger) underwater photography equipment is tiny compared to the parent/grandparent snapshooter market. So the bottom line is that there just aren't any digital cameras designed with the underwater market in mind. Rather, the cameras that tend to work best underwater are lucky accidents based on the features the manufacturers have added to their land cameras.
One of the features that is highly recommended for underwater photography is the ability to control exposure manually. This allows you to override the camera's internal meter to control the background exposure and let the strobe fill in the foreground with artificial light. It also let you control depth of field. It is particularly critical for wide angle as without it, the camera will almost always give you a washed out look to your blue water.
It would appear from the SD500's specifications that the manual mode only lets you control ISO and white balance. It appears that shutter speed and aperture cannot be controlled directly, though perhaps you can affect them through the exposure compensation to a certain extent. So, as James says, the camera will most likely pick the lowest (most wide open) aperture value in lowlight situations. This may be mitigated somewhat in macro mode as most cameras tend to have lenses whose minimum f-stop increases with focal length. In macro mode, you'll most likely be zoomed in so the aperture value might well be acceptable in that case. However, for wide angle shots, you likely won't be afforded much creative control of background exposure. As for shutter speed -- many of the small automatic digicams default to an unacceptably low shutter speed when the flash is enabled (1/30 in most cases). Without the ability to override this, you run the risk of not being able to freeze the action. I note as well that the camera does have an "underwater" mode. Unfortunately, this is most likely just a white balance adjustment more than anything else. It might well be helpful in putting some red back into the image if you're not using strobes, but might do more harm than good if you are using external lighting.
Again, if your plan is to have something small and cool to play with before deciding where to go in the future, or want a digicam cheifly for topside use and occasionally for close-in snapshots while snorkeling or diving then you may have found what you're looking for. However I would try to limit expectations if you want to make the camera an underwater workhorse.
Mike