I have been playing guitar for 2 years, and am forming a band. I have decided to purchases a new guitar (no more than $500) but am unsure what to purchase. Our band primarily plays covers, and usually stays within indie, grunge, and 90's alternative. I prefer humbuckers, but single coils are nice too, as evidenced by Kurt Cobain favoring them. does anyone have any suggestions?

Kurt Cobains guitars usually ended up with humbuckers being put in them.
He had a Jaguar, Mustang and a Tele built with humbuckers.
Not sure how the exchange rate is at the moment, but I reckon you could get a Mexican Fender Fat strat for that kind of money.
Very good guitars

I agree with the choice of a Fender Fat Strat. The one I had was under $500 and had a floyd rose on it. They have an even lower priced one without the Rose. It would definately get you the sound your looking for.