You can get almost 8 new games with that much, but if you're absolutely determined to spend all 500 on just 5 games I'd say you're going to have to include both Rock Band and GH3. That will knock out the first $270. You can spend the remaining $230 on Call of Duty 4, Mass Effect, and then whatever else you want. If you wake up soon enough to realize you can get more than 5 games for that amount, I'd say go with: CoD4, RS:V, GRAW2, ME, AC, Forza 2, H3, and RB. That should put you just around $500.
As for the reasons:
Rock Band: This is the most fun you can possibly have with local multiplayer. It's still an awesome game alone, but the most fun can be had with up to three more friends. I cannot express to you how much fun it is playing for hours with some friends trading around parts.
GH3: This is a great game for some of the same reasons as RB, though to a lesser extent with the local multiplayer since you can only have 2 guitars.
CoD4: The best multiplayer shooter out right now if you ask me. The incredible single player campaign is only topped by the extremely deep multiplayer experience. Quite possibly the most intense shooter ever made, and did I mention it looks amazing too?
Halo 3: Ok, not the best game for the 360, but there is definitely a lot of fun to be had here. If you're like me and you have tons of friends who are halo maniacs this is a must have simply for the LAN party possibilities. As much as I dislike the online community, this is still a very solid shooter with good graphics and a great single player campaign.
Assassin's Creed: Amazing stealth action game (though it's hard to categorize this game in any single genre). Incredible graphics paired with great gameplay. The only downsides are that the story is a bit convoluted and there isn't a multiplayer component to keep you coming back after a play through. Out of all the games I recommended above I would say this should be first in line for a rent if you're iffy on the purchase.
Forza 2: As someone who is traditionally turned off by racing games due to the ever-increasing barrier to entry these days, I was pleasantly surprised by Forza's accessibility and, once I got into it, the depth. A great game for racing newbies and veterans alike, and it runs at a buttery-smooth 60 fps all the time.
GRAW 2: If your in to tactical shooters, this is a must have. This game picks up where the excellent GRAW left off and adds some great new elements to the formula. Though the single player campaign leaves a little to be desired, the deep multiplayer experience more than makes up for anything the single player lacks.
Rainbow Six: Vegas: Last but FAR from least, we have Rainbow Six Vegas. I honestly don't know where to begin; this is such an amazing game. Though Rainbow Six is based in tactical shooting, it still maintains quick pace to keep things interesting. The single player campaign is awesome, and beating it on realistic, though very hard, is one of the most satisfying experiences to be had on the 360. Though almost a year old, the multiplayer field is still well populated and for good reason. The multiplayer experience, like several games mentioned above, is very deep here as well. Character customization is great, and the slight RPG elements are only outdone by the great RPG integration in CoD4. The cover system really stands out in my mind when thinking of RS. Though a cover system may seem like a small thing, the way it is integrated into both the single and multi-player experience in Rainbow Six makes it a very fun and interesting ingredient in the RS formula. This cover system is very cool, and it makes cover systems from games like GRAW and GoW look antiquated and awkward. Overall just a great game. The only down side to Rainbow Six at this point is that it is soon to be succeeded by the eagerly anticipated Rainbow Six: Vegas 2.
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