It's quite late, so please excuse the rambling nature of this post:
The answer to which is better (which I've seen you ask here and at dpReview quite a bit) is entirely subjective. The TL500 is a BEAST of a camera. Considerably larger than the TL350 with less range and a finicky control system and very slow interface.
The TL350 is a much more "consumer" camera lacking the build quality and optical sophistication (and a much smaller sensor) than the TL500, but with astonishingly good video, a perfect (IMO) optical range, and it shoots raw (in burst mode no less!)
Here's the thing: They're both awesome and they're both terrible. You'll notice a lot of photogs almost revel in the flaws of their camera. Check out the Sigma forum if you don't believe me!
If I had the $$$ I would have kept both, but as it is I was looking for a "serious" camera so I went with the TL500. The image quality is indeed vastly superior, but it isn't a "pocket" camera by any stretch of the imagination, the video is a sad joke, you're nuts if you don't buy an "auto cap" ($18 extra on ebay), you loose a lot of zoom reach, and it's "burst" rate is a sad joke that nobody laughs at ("Processing" screen haunts my nightmares!)
The TL350 is IMO, the best small P&S on the market. I've owned quite a few Sony and Lumix numbers (and used the Canon SD series) and none of them pack the features and image/video quality of the TL350.
The TL500 is IMO, the best "serious compact" on the market. It's build quality is phenomenal, the files rival those of my old GF1 on many levels, and the (corrected) RAW output has an almost supernatural flexibility in the shadows.
So, yeah, I doubt I've helped you make a decision, but you need to think about what kind of camera you want before you decide which of these to get.
PS The TL350 can be had for about $100 less used than the TL500, so that needs to be taken into account.