So the s500 is essentially a current gen super-phone with a HD screen the gimmick cloud service, while the s350 is at best a midrange phone.
Hardware-wise the s500 competes with the galaxy s2 and the s350 with the original galaxy s.
By the time they come out S3 should be coming out as well, making the s500 last gen and the s350 nearly budget.
Now 99% of users will probably more than satisfied with the s500 performance wise, and casual users should have problems with the s350. What worries me is the batteries. Dual core 1.5ghz phone with a 4.3 display using a 1430mAH battery?? and a 1ghz phone using a 1300mAH? Galaxy s1 had a 1500mAH battery, and Galaxy S2 has 1650-1800 mAH battery, so ya...