Image stabilisation helps reduce the blur you get from camera shake (which can be a real problem when you're using a long zoom or shooting in low light). A lot of people will say you'd be better using a tripod, and they'd be right, but obviously it isn't always practical to carry a tripod with you. Although image stabilisation (or anti-shake as some companies call it) isn't among the most important features, it's certainly a plus, and quite a few cameras now include some kind of anti-shake function - including DSLRs - so you might as well get one with that feature if you can afford it.
The Pentax *ist range, Canon 350D, Nikon D50 or Konica-Minolta Maxxum 5 (this last one has anti-shake) have all dropped quite a bit in price recently and you might be able to get one with a standard kit lens within your budget. Bear in mind though that unlike a point & shoot, a DSLR is not just a camera but part of a system - if your interest in photography continues to grow you'll probably find that the standard kit lens isn't enough, and soon you'll be buying extra lenses, flashes, filters etc. Even if not, remember there's still the expense of memory cards, spare batteries, the cost of printing, and possibly computer hardware and software. In other words, you might be able to get a camera for $500, but you'll end up paying quite a bit more. So if $500 is your absolute limit, a DSLR might not be the best choice, but if your budget is more flexible then definitely consider it.
The Pentax *ist range, Canon 350D, Nikon D50 or Konica-Minolta Maxxum 5 (this last one has anti-shake) have all dropped quite a bit in price recently and you might be able to get one with a standard kit lens within your budget. Bear in mind though that unlike a point & shoot, a DSLR is not just a camera but part of a system - if your interest in photography continues to grow you'll probably find that the standard kit lens isn't enough, and soon you'll be buying extra lenses, flashes, filters etc. Even if not, remember there's still the expense of memory cards, spare batteries, the cost of printing, and possibly computer hardware and software. In other words, you might be able to get a camera for $500, but you'll end up paying quite a bit more. So if $500 is your absolute limit, a DSLR might not be the best choice, but if your budget is more flexible then definitely consider it.