I agree with the others that $500 is still too much. Here is my view:

The shop started WAY too high and set themselves up to keep the gun. If they now believe their own inaccurate appraisal then they will see it as a $400 break for you and that is substantial - you are not likely to get them to $500 - I would think less would be out of the question.

As far as your target price, it is tough to find any decent Smith N frame for $500 regardless of what is right - $500 has become close to the bottom line based on the name alone.

That said, you may pay at least 5 bills no matter where you look, but you can get a better 58 for that money than the one you describe.