Olympus E-500 has a
8.0MP Four Thirds (17.3 x 13 mm ) sized CCD sensor . On the other hand, Olympus E-420 has a
10.0MP Four Thirds (17.3 x 13 mm ) sized CMOS sensor and features TruePic III processor.
Below you can see the E-500 and E-420 sensor size comparison.
Olympus E-500 and Olympus E-420 have the same sensor sizes so they will provide same level of control over the depth of field when used with same focal length and aperture. On the other hand, since Olympus E-500 has 24% larger pixel area compared to Olympus E-420, it has potential to collect more light on pixel level hence have less noise in low light / High ISO images.