To do a chase sequence you need at least three groups of LEDs. The Arduino can easily control brightness on six groups. Because you want 500 lights you may want to go for 5 groups of 100.
If you put all the LED's in parallel and drive then with 5V you will need a current limiting resistor for EACH LED. You can put LEDs in series and use one current limiting resistor for each string but the necessary voltage gets high. Usually you will want to use a combination of series and parallel to keep both the voltage and number of current limiting resistors to a reasonable level.
This calculator gives you choices for how to wire your array given the LED specifics and the supply voltage available:
http://led.linear1.org/led.wiz