This has me totally confused...

[gs500ew_uk]

Nice sunny day ride home from work, decided to flip the headlights off whilst at traffic jam and engine then sounded like it was only firing on one cylinder! flicked hedlight back on - running fine. Tried the same again whilst on the move and the engine spluttered and nearly died. Lights back on, running fine!  Sounds to me like a rectifier issue, as the indicators have also started flashing erratically, sometime quick, then normal, then quick again...  Love mechanics, HATE ELECTRICS!!   

[The Buddha]

The ground is bad, and its grounding through the headlight.
Cool.
Buddha.

[gs500ew_uk]

Always the simple things - cool, thanks Buddha. Would that be the ground at the recitifier?

[adidasguy]

Start at the battery. Check and clean all connections.
Then unplug and reconnect the 2 plugs from the regulator - that will help wipe off any crud.

The erratic blinking and stuff sounds like bad ground. Could be bad +12 connections. Seems to be making and breaking connection as you bounce along.
Regulator could be going out. Headlights off lessens the load and may make it shut down.

Check your battery. If it starts going bad it can affect the regulator.

A volt meter is your best friend, along with the wiring diagram. Check voltage at battery with bike off. Should be over 12v. When running, it should be 13.5-14v (roughly). Should hardly change with headlight on or off.

[Bluesmudge]

Does your GS500 have a headlight switch? I know all US models are headlight on all the time. Is this headlight switch aftermarket?

[adidasguy]

Profile indicates UK. The UK had headlight switches long after we required lights on all the time. Ever wonder what that flat plastic cover is on the right control just above the starter button? That's where the switch went.
you can buy some controls from Europe with the headlight switch - easier to find for 89-00 models. I have a couple but have not installed them yet.