Yes you can
This is not recommended due to the fact that Express editions of SQL Server are limited to a single CPU core. We recommend dual-core CPU for 500 machines, as described in more detail here - help.kaseya.com/.../K2-System-Requirements61.htm
Also be aware that the Express edition has a database size limit of 4Gb. This may or may not cause a problem with 500 agents depending on how much monitoring data is collected and the log history settings. You can monitor the database size from the System > Statistics function.
I'd echo Dominic's post, I am not a Kaseya employee,
If you plan to capture many dozens of alert types, logs, lan watch data and so on, definitely don't use express. We all but crashed our VSA using SQL 2005 non express by flooding it with monitoring, i'd hate to see how quickly performance on a SQL express box falls to bits.