I had an '87 KX500 and the only think I didn't like was the plastic and the vibration. I would think in an aluminium frame, you'd have a hard time holding on to it and no amount of rubber dampners would eliminate it. I would think a steel frame the way to go.
Personally, I would rather find a 500 and update/restore it, rather than convert/build my own. They are still good bikes and Race Tech (et al) can update the suspension to just about as good as you'll get on a new bike. The frame geometry has not changed at all to speak of.
I love my '76 Husky 360 and my '80 Can-Am 400. If I had pillow top grips and maybe some good (antivibration) triples, I'd probably still have my KX500. Now I am about done building an '80 RM400. I know these are old bikes but there are plenty of good deals on '90's 500's out there.
Just one more thing...at the recent Portuguese National in Faial, a guy rode an old CR500 to 7th overall in combined MX1/MX2. It was a borrowed bike, just so he wouldn't fall too far back in points.
(I think I was 27th in MX2)
The geometry might be the same but the riding position and ergo's of old bikes are vastly different to the new ones.
Older bikes feel like you're locked in one position, like sitting in the bike rather than on it. Hard to move your weight around compared to the new stuff. I hated the feel of my 94 CR till i put extra seat foam in to flatten it out.
I'd definately rather have a new chasis, and we won't even mention the improvement in brakes over the years.