Seeing as I owned both of those: the M500 is way better!
More mid-range and bass overall on the M500, and less treble quantity. It's much closer to "neutral" than I've heard from any portable headphones, open or closed. When I owned the DT1350, its applicability to multiple genres was limited for me and I could never tolerate it for electronica or classical. The M500 was more versatile and was especially nice with any kind of music that used vocals. I also really liked its bass - deep and forceful, but not bloated.
I really, really liked the M500's sound, and I do plan to get another someday. Seriously the best-ever that I've heard from closed portable headphones since I first got into the market segment back in 2006.
Here's a review I wrote of the DT1350 btw: http://www.head-fi.org/t/666438/review-beyerdynamic-dt1350. I consider the M500 to be way better than both the DT1350 and V-MODA M-100 btw, and at the same price ($300), it's my instant recommendation for a $300 closed portable headphone.