you should definitely keep hdd for storage
setup is almost identical as hdd, just follow these steps:
1) plug the ssd in, go to bios and set AHCI mode for the sata channel you plugged it on
2) boot normally to your current windows from hdd, check ssd's firmware version, if the newer version is available, download and flash
3) once your ssd has latest firmware on, shut down, unplug hdd (plug ssd in higher priority channel to avoid drive letter mess ups, i.e. if hdd was plugged in channel #0, have your ssd on that channel and replug hdd to #1), turn pc on, install windows to ssd (don't preformat the ssd in windows before installing fresh windows, it tends to mess up the partition alignment resulting in performance loss; just create new partition during install)
4) once the installation is complete, shut down pc, plug your hdd back in and enjoy the snappiness of your rejuvenated rig
"Should I keep the 500gb hd to use for extra space?" Yes, for around $200, you will be able to get a prety substantial size SSD - in the 128GB - 160GB range. Even though that is a pretty good size, you will still want to save the mechanical HDD for extra storage. Setup the SSD as your windows boot drive and install Apps and games that you need to load really fast and keep your data and files on the HDD.
"Will installation of the SSD be like a normal harddrive?" Yes, it will be identical to using a hard drive. You will have to partition and format it and then Install windows on it.
"Will a SSD be compatible with my setup?" Yes, an SSD will be compatible with your setup as long as you have a SATA port available to plug in to it. The ASRock N68PV-GS has 4 SATA II (3Gbs) so you should have an available port. I suggest using the lowest numbered SATA port for the SSD because it makes installation of windows easier.
Make sure to do a full backup of your system before you try to upgrade to make sure you don't lose anything.