I'm finishing my first year with a 501s and, like others, can confirm that I love it. That being said, I think you need to consider a bunch of other factors in making your decision, some of which haven't been mentioned here. For instance, I'm over 200 lbs and have a bit more of an MX orientation. I've decided at my age that time in the saddle - any time in the saddle - is a good thing, so I've made plenty of runs from my house to the track, done a couple motos, then ridden home again. Big fun, and reminds me of how it used to be in high school riding Yamaha Enduros everywhere.
On the track, I've done the suspension (as you would for the extra weight at least) but definitely notice the lack of power. While hot-rodding the motor is the next step, my friend's experience in this regard with his 350 suggests the gains for the 501 will be more accessible and easier to use, both on the track and the road. And if you want to be competitive at all on the track, you will definitely need that extra power. I've raced an MX once this year (riding to the track and back) but noticed the deficit immediately and won't try it again until the motor is tweaked fully. I'm told and would expect that deficit is even more noticeable on the 350.
In the woods (Eastern slope Rocky Mtns), I've been amazed at the tractor-like quality of the motor and the relative agility of the bike on the whole. While the fancy boys on their 300XC's can always run away from me, the 501 stays reasonably close, handles all the gnarliest and tightest trails, and has never let me down.
Frankly, I think you need to be a better rider to get the most out of the 350, while the 501 offers the broadest canvas for riders with varied skill sets. This might sound a bit counter-intuitive, but my experience bears this out.
