Well, it's possible and it works but do it on your own risk!
Please note you can make your router permanently dead by this kind of upgrade so be careful!
1) Install WL-500b/g utilities from CD, start the Firmware Restoration utility and make a selection of requested firmware file.
2) Stop any personal firewall running on the workstation from which you are performing the upgrade. Make sure you can PING the router. It's recommended to set the router to factory default.
Don't perform the upgrade through wireless interface (use cable connected to any LAN port instead).
3) Power down the router (unplug power cable).
4) Push and hold the RESTORE button.
5) Power up the router, wait until POWER LED starts blinking (about 5 seconds).
6) Release the RESTORE button, start the upgrade process in Firmware Restoration utility.
7) When finished, power down the router, power up again and restore factory default (from web configurator or by pressing the RESTORE button for about 30s while the router is running).
8) Configure the router as you need.
Don't try to use features of WL-500G which are not present in WL-500B (AES, g-band commands)
Next upgrade can be performed by standard way (using web configurator). You will need the Firmware Restoration again only if you decide to flash the original (B-version) firmware to the router (one times only).