You can definitely do it. But you either can't use your home folder to store your data for the most part, or you have to figure out how to do some kind of voodoo.
What I did is not supported by Apple, but it works just fine. And you can take it in for repair under warranty no problem. So there's nothing to stop you from doing it.
I got the information I needed here:
http://www.ransom-note-typography.com/index.php/SSD_and_Your_Home_Directory
http://www.tuaw.com/2009/05/14/tuaw-tip-moving-your-home-folder-to-another-disk-or-moving-it/
Basically the idea is you copy your user folder to a big conventional drive. Then you install Lion on a new SSD and create a user account with the same name. I named the big drive "Users" and then put the Home folders in its root.
Go to Users& Groups in System Preferences. Right click on the account. Choose advanced options. For the Home directory field, there's a "Choose" button on the right. Click it and navigate to the copy of the account on the new User drive, and select it. Reboot. You will now be using the user account on the conventional drive. Your Desktop, Pictures, Music, Downloads, Documents, etc. folders are now on the big drive, but it's just like it's on the boot drive.
A big benefit here is that you can format your boot drive and reconnect it to the User drive, and not touch your files at all. And you can clone the User drive and it won't contain your system files. (Or your Applications which remain on the boot drive.)
If it's not clear, ask questions and I'll try to clarify.
The Carbon Copy Cloner FAQ states:
Yes and no, it really depends. Performance will be affected during the clone (especially the first one) as CCC reads the entire source volume and writes to the destination volume. If your work is "disk bound" -- that is your applications are reading or writing to either the source or destination, then you'll notice a performance hit. If you're just reading email or writing a Pages document, then you probably won't notice the performance hit.
Affecting the accuracy of the backup task is something else that should be considered. Typically it's OK to work from the source volume while you're copying it, with the understanding that if CCC copied a file, then you open it, make changes, save it, then CCC completes the backup task, the modified version of your document is not backed up (this time around). Typically that's no big deal, the modifications will get backed up the next time the backup task runs. More importantly, though, if you're working with large files (mounted disk image, Entourage email database, VMWare/Parallels container) during the backup operation, it is possible that those large files could be modified while CCC is backing up that file. This won't affect the source file, but there's a good chance that the backup version of that file will be corrupt. For this reason it is a good idea to stop using applications that may be modifying large files.
TL;DR: there is performance hit depending on the intensity of file I/O you produce; files you work on will not be backed up; large files may get corrupted.
Best Answer
So you can keep using your old 500GB HDD I would buy a cheap enclosure for it. They can be had with USB 2.0 for as little as $10.
Concerning the Software-Side, neither SuperDuper nor Carbon Copy Cloner are bad. Personally I, however, prefer Apple's own Disk Utility.
Simply boot from your Install DVD or Restore Partition (if you use Lion), holding down the ALT key while you power on your machine.
Both the Install DVD and the Restore Partition give you access to Disk Utility. There simply hit the Restore tab and drag and drop your Source an Destination volume accordingly.
If you do not want to buy a new HDD enclosure simply clone your internal HDD to your spare external using the aforementioned way. Then replace your Book's HDD with the SSD. And clone everything back to it.