Well, alright since there don't seem to be any old farts helping you out here's my 2 cents.
It's an old carbureted bike so you can start off doing the obvious stuff.
Air cleaner, carb and exhaust pipe. Replace the stock air cleaner with a K&N air cleaner. Look on their website, they'll have one I'm sure. Next is the exhaust pipe. If possible avoid buying a new muffler. Instead try punching holes in the front and rear of it to make the exhaust gases flow through better. I'm not familiar with these cans, but you might be able to find a way to punch holes like with a hole punch or long drill bit etc. Take it one step at a time.
Finally, you may have to increase the mid-range on the carb. The easy way to do this is to raise the jet needle in the slide by adding a small washer underneath the bit that holds the jet needle or just raise it by moving the clip down a notch or two.
You can check out Mikuni (Sudco in So. Cal handles Mikunis of all types) to see what they recomend for substituting a Mikuni on the EX500.
That's all the cheap stuff. Before you go the next step you're better off trading up to a bigger bike.
I must heartily disagree. Do what makes sense to do to make it go faster, learn to ride the bejesus out of it, and THEN get a bigger bike. You'll be a better rider for wringing everything out of that little bugger it's got to give, and be in less danger while doing it. When you move up, things will happen a lot faster, and you will need to already have some idea of what you are doing. Besides, there's nothing quite like the thrill of staying right on the tail of some know nothing fraud riding the latest bling without a clue. It will make you feel like a genius! Just don't expect the same result if the guy is any good.
I bought a new 500R in 2002 and I am still riding it (36,000 miles now). There is no reason you need to outgrow it. Don't mess with the motor: It does not take kindly to attempts at HP boosts. ALL the power on this bike starts at 7,000 and it gets faster as the motor breaks-in. You may not be the fastest bike on the street, but you can smile all the way to the bank with 60 MPG (2 for 1 gas stops compared to your buddies on the 600s), and dirt cheap insurance.
It's more fun to ride a smaller bike fast and smooth then a fast bike like a squid. The bike will go as fast (and stay on the road) as your skill and experience permits.
Thanks. Really sounds good. A lot of meatheads out there that are so quick to make mean comments. I only in the slow break in (<4000 rpms), but looking forward 2 opening it up in the future and using the bike 2 learn.