totally disgusted

The Employee Polygraph Protection Act of 1988 is settled federal labor law.  If you are an employee of a private business your employer must comply with EPPA.  Were you provided with a notice letter that stated the specifics of the loss under investigation?  During the pretest interview the examiner is required to read to you a notice of your employee rights under EPPA, provide you with a copy of the notice and you must sign that you received your copy of the notice.  The notice would inform you that you can file a complaint with the Wage and Hour Division of the Department of Labor and you should do so immediately, in addition getting an attorney. 

I understand that no innocent person would repay the company for the theft, but why would a truthful person pay $500 to take a test they have the right to refuse?   

Under EPPA the employer cannot take job related action against you even if you fail!  You have a slam dunk case based on the facts you reported.  Enforce you rights!