Drop bar conversions can be tricky, for geometry reasons. Often the bike ends up not being what you want in terms of fit or comfort.

However, you could convert this bike to drop bars quite easily by simply replacing the handlebar and getting some 8-speed STI shifters (e.g. wiggle.com | Shimano ST-2400 Claris 8-speed Road STI levers | Gear Levers And Shifters Road ). From what I see the bike has mini-V brakes, rather than V-brakes, so they should be compatible with the STI shifters.

Are you hoping to get the bike repainted, upgraded drivetrain and with a new wheel build for $500? I'd suggest looking for a used/cheap bike honestly.