Can i update my A500 and still keep root.

I'm not sure about the update cause I never do them because I just get them from XDA and install updated ROMs when they come out.
I'm not sure what it fixes. Acer is bad about posting that kind of info.

 

This will help you out with your questions.

New update 4.010.13 - xda-developers

 

After you pick which rom you want you need to drop it in on your sdcard.
Leave it in the zip file.
I always extract the zip file onto my computer to test that it isnt corrupt. Then I just delete the extracted files once I see it is a good file.
Download Acer Recovery installer from the market. Install this program. You will see two tabs on the top with options to pick one.
Select Clockwork Mod Recovery rev 1.3.4 by Thor2002ro.
Select install Recovery image.-This is for the install menu you will need to install the rom. I had this on my computer for three weeks before I got the nerve to use it But after seeing a video on it,it is very easy to use. It will take about 1 minute to install at most.
No to install your new system.
Here is a video it will better show you the steps. Really very easy to do..
If you run into any snags let me know...

AS for a ROM it is really a matter of preference. Ive switched about three times and I don't tweak my CPU.
This one below looks to be a nice ROM with OC capabilities I will probably go with this one next. But What I do is go to the development forum at XDA and read through the last 10 pages of any ROM and see what kind of problems its having and how people like it.
Good Luck Once you flash a ROM you'll be hooked. LOL
[ROM][26/08]Lightspeed_1.0.2[HC3.2] - xda-developers

[Tutorial] How to Flash Custom Rom On the Acer Iconia A500 (Virtuous Picasso) - YouTube