flanker,
I am a happy E-500 owner/user since one year. Indoors, outdoors, with/without flash and the only images that are too dark are the ones where I failed to set the camera properly. I suggest you read the manual and start shooting. Don't compare two cameras because there is no point in doing that, but I bet you, my E-500 beats any P&S or compact camera indoors or outdoors. If that would not be the case Oly would not have survived, especially in US where the E-500 is very very popular. At the moment the E-500 is the most selling Oly dSLR in the world.
You seem to be new to photography so I think the only problem is the level of your knowledge. I am not saing that to be rude, but I think you shoud experiment more and start taking pictures and trying out different settings. Maybe the E-500 is too advanced for your needs/expectations. The E-500 is called "entry level" not because it is less advanced than the E-1 which is called "pro" but because it is cheaper built to make it affordable. It is definitely a very good camera, used by both pros and non-pros and to understand its functions you either have to be an experienced non-pro with high requirements on photography and a burning desire to learn, or you have to be a pro who already knows/understands how to use the camera. Being "entry level dSLR" is not equal to simple P&S with bigger and exchangable lenses.
Anyway, as Mikefellh says, unless you show us some pictures we can not help you.
