I've just had a look over the 500D manual, and tested with my own 1000D.
Firstly, it's custom function 10 on the 500D, and you need to set it to 0: AF/AE Lock (which should be the default)
Secondly, I just realised that you'll need to have the camera's focus mode in One-Shot AF. If it's in either AI focus mode, it will keep refocusing as you move the camera.
When you press the * key, you should see it light up in the viewfinder to indicate that exposure has been locked. There doesn't seem to be any indication of that on the rear LCD though if I set it to stay on. With my 1000D, exposure lock seems to be held for approximately four seconds. There doesn't seem to be any way to change this. (I find the four seconds to be a real nuisance as well)
If you focus within that time, as long as the shutter is held down halfway, exposure should stay locked.
If you focus first, as long as you keep holding down the shutter button halfway, pressing the * key seems to lock exposure indefinitely. (it lasted more than 60 seconds at least) You can also press it again if you want to change the exposure.
If you have any flash enabled, it will fire the flash and the * will act as flash exposure lock, rather than locking the shutter speed/aperture. I don't see any way to change this behaviour, other than disabling the flash.
From reading the 500D manual, this should all work the same as my 1000D. I hope that helps.