I certainly wouldn't class £499 as expensive. I'd class that price range as budget. I've got a Sony HDR-XR520VE which costs £1,050 and thats only classed as top end consumer or mid range overall, with the broadcast camcorder costing over £1,500 being at the top of the range. It all depends on how much you have to spend. When I buy something new, I always near enough skint myself for a week so I can put every penny towards getting something thats as good as I can afford. That way I know i've managed to get myself something that is truly worthy of making me excited everytime I use it, and something that is capable of making my jaw drop to a certain level when watching the recorded video on my tv. Watching my kids in high definition, with the kind of image quality that the HDR-XR520 is capable of is, well, something that, 5 years ago, I never thought i'd see.
I would have to say that, in my opinion, in the £500-£600 range,the best camcorder is probably the Canon HV30 which sells for about £600. Now thats an awesome camcorder for the price, god picture quality is totally excellent. If you're not willing to save up, or just dont wanna spend that much then there's the £400 Panasonic HDC-SD20 which is also a damn good camcorder really. Not as good as the Canon HV30 but hey its not as much money.
Have a look at these you tube videos of the camcorders and you'll see the image quality (make sure you click on the little 'HD' icon to see the highest quality) :
Canon HV30 YouTube - Canon HV30 - 50i to 25p Slow Motion test 4 Panasonic HDC-SD20 YouTube - Panasonic HDC SD20 Zoom Test In Full HD
If you want to spend even less than £400, then there's the Panasonic HDC-SD5 which sells for about £350. Here's a demo video of that one :
Panasonic HDC-SD5 YouTube - Panasonic HDC-SD5 Macro test
It all depends on how much you wanna spend, but if you care a lot about image quality then it definately pays to spend more, or at least as much as you can possibly afford. Hope this helps you. I was a little scpetical in the start of spending nearly £1,100 on my HDR-XR520, but jesus, i'm glad I did. Everytime I look at what i've recorded, I sit back and smile. When I buy something, I try and think of it as something i'll have years before replacement, so thats why I spend everything I have on each item when I buy each new item. You may be different.