Hi Geezer,
While you can use a 500mV reference, it will (apart from using pins on the PIC) compromise your system performance. The non-linearity for the 'F877 goes up to 1.5 bits with a 2V reference. Microchip don't specify performance with a Vref below 2V, but you can be sure it's much worse at 500mV.
You are also down in the digital noise. You would be better off amplifying your signal up to 5V full scale before connecting it to the PIC. A gain of 10 is easily acheived and well worth the cost of a couple of quad op-amps (actually four dual's are probably cheaper). An LM358 will give reasonable performance.

Regards,
Robert G8RPI.