A floppy emulator like the Gotek is certainly the easiest way to interface with an A500. It can be made to replace the internal or external drive, or even a switcher can be built or bought:
http://amigastore.eu/en/485-df0-selector.html
The A520 outputs composite, which is a pretty poor quality signal. Using the RGB output directly is much better, the image is crystal clear that way. But as the output is not standard VGA, you'll need to choose your monitor carefully. There is a compatibility list here:
http://www.amibay.com/showthread.php?78792
I have the BenQ BL702A and it has served well.