Should I spend 500 on this car?

No a bad knock in the motor can cost you a fortune for engine rebuild. Keep looking. I rebuilt lots of motors and people say well the person told me it was a little low on oil or it was like that when I bought it and never gave me any problem. Then found out what was wrong and is trying to dump it. If you want to take a chance pay no more than $150. or less and hope if you drive it easy that it lasts. Then dump it at the wreckers or sell it whole for parts only car.

If it ACTUALLY runs, it MAY be worth $500. Last I checked, you should be able to get $300 as SCRAP METAL. That said, unless you can literally drive it away, it DOES NOT RUN, no matter what the seller claims. I wouldn't buy a vehicle from a private owner without having an mechanic of MY choice inspect it first.

Walk away. Buicks that knock often have broken piston skirts from severe piston slap common in that engine. If you want to spend $500 on a car that needs a new engine, it's up to you.

Ask to drive it.  Go five miles out and five miles back.  If it did not start or run, then forget it.  The rule is ten cents a mile.  $500 would be 5000 miles.  Offer the guy $275.  He will take it.

I would not buy anything that I could not drive away.

$500 is a good price if the body, tires and brakes are in good shape. You'll need a motor put in it right away. I just paid $5,000 for a 2006 Buick Lucerne with 119,000 miles on it.

Knocking noise from engine?

Thank seller for his/her time, say 'NO', and walk away...

NOPE. WASTE OF MONEY.  Apparently you're pretty clueless about cars. 

Engine is shot.  Do not waste your money.

Knocking has me walking.(reality, running; but it don't rhyme)