Agreed. For 500 quid, you have way more than you need? For just word, excel and internet, as even a Pentium 4 processor and 1 GB or RAM would handle that easily enough.
But for a fair bit cheaper than you are spending you should still be able to get a Dual Core processor and at least 2GB of RAM. Dedicated graphics card will not be needed so you can go for the integrated intel graphics that will come with most of these Dual Core PCs.
Check the usual places, like PC WORLD, Harvey Norman, even Argos if you want brand new. You should find a Dual Core, 2GB RAM and Monitor Desktop for under 500.