Uh. I really don't know. I don't know the advantages and disadvantages with each.
I realize that $500 will be limiting, but I really don't want to spend much more then that.
Keep saving. $500 will get you a decent head used, and a decent cab new/used, but not both.
What $500 WILL get you is a junky halfstack that sounds like shit and makes you look bad, or alternatively a junky combo that again sounds bad.
Look on craigslist for used amp heads, you can get a Peavey 5150 for around that if you're lucky. Keep on saving until you have around $350-450, which is the price range for a good used cabinet. You can get a good Marshall cab for around that price, or a Mesa cab if you're lucky and find a deal. That's less than a thousand that you've spent, and you've got yourself a professional sounding rig that you can take to any gig, any studio, and KNOW that it is good enough.
If you want gig worthy gear, you have to pay for it.
The Spider Valve stuff is great for bedroom. You could use it for live, but I wouldn't recommend it.
The head usually contains the pre-amp which you hook into the actual amp (or, in this case, half stack)
Here's a lesson in amps:
There are four "components" in your average rig.
( 0) Pedals - you could say these are a component, but I would lump them under "Preamp" and "effects" )
1) Preamp - generates the guitar tone
2) Effects - adds effects such as flanger, phaser, etc.
3) Power Amp - makes the signal powerful, drives speakers
4) Speakers - makes the signal sound
Amp heads have both a preamp and a power amp built into the headshell. Some amps have effects as well, but most don't.
Combo amps have EVERYTHING built in.
You can get individual rack units that individually act as preamp, effects, etc.
And what is the advantage of this (Yeah. I'm too lazy to look this shit up.)
What is everyone's thoughts on the Line 6 Spider Vavle amps? The Bogner ones?
Head + Cabinet is easier to move. Anything larger and heavier than a 1x12 tube amp is a huge pain in the ass to move, and having it in two parts makes it much more convenient.
Also it is a lot easier to customize your tone. If you have a combo, you're pretty much stuck with it. But if you've got a head, you can always upgrade the cabinet later on.