So, if I already used my $500 bet, I cannot use it again, right?
Right. You can bet $400, $300, $200, $100 ... whichever round/song you wish.
And just like Jeopardy (for those in a deficit), it doesn't matter. You can wager whatever you wish (that you haven't already used).
Clear as mud, right? I'll give a couple of example.
TAC finished Round 1 with $500. Round two he bets $200, and is in the bottom four. His total after round 2 is $300. His remaining wager amounts can be $100, $300, $400.
Zook finished Round 1 with -$100. Round two he lets it ride with a $500 bet and is in the top four. His running total is now $400. His remaining wager amounts can be $200, $300, $400.
and so on.
At the end of 5 rounds, the top 3 will compete in Final Jeopardy.