Think about it this way: if you spend $500 upgrading a crappy bicycle, you will essentially end up replacing the head and the handle of an ax. You're better off moving up to something better, unless you started out with something of high quality (an "upgradable" bike, like a CAAD9) to begin with.

Believe me, I'm speaking from my own experience... putting money into a cheap bike is not worth it in the long run.