I don't understand what you want. Parts of what you want are possible, and it seems you understand how to do it (sort of).
I am sending out a newsletter to over 500 emails and I'd like to add the client name to the PDF document…
With the Mail Merge function within InDesign, you can take your (let's say four-page) newsletter and add 500 client names and email addresses, but it would result in a 2,000-page InDesign document (with 500 consecutive copies of your newsletter, each with a different name and email address, or what ever other data you need). That document can easily be exported to PDF, and the PDF can easily be broken into 500 four-page PDFs with Acrobat. If the page counts are an issue, you could break your data file into smaller chunks, and do several merges.
Here's where I don't understand you. Are you looking to make one email with 500 recipients, and have the appropriate PDF be attached automatically, without you having to choose the appropriate PDF with the cooresponding email? If so, that sounds like an email issue, more than an InDesign one. It may be (and probably is) something that can be automated, but I don't think InDesign is the step that is getting in your way.
We have Design Merge, however the only way to save out the variable data for the newsletter is to save them as post-scripts and then convert each file into a PDF.
I don't know anything about Design Merge, but Data Merge doesn't require this step. You can export to PDF directly from the InDesign document that is created by the Data Merge process.
In my opinion, it's not possible with indesign, the best you will obtain is 500 times the same PDF file with your variable, that you will have to reconnect to your e-mails separately, and considering that the name of each PDF file won't have the name of the variable in it, all of this will result a real pain.
There is maybe an alternative using MS Word mail merge (please don't make this face of disgust ;-) ) because MS Word has a data merge system that can use the e-mail address field imported in your word files to automatically send each records directely using the e.mail address as a "to:" field in your e-mail browser (i.e Outlook, Firebird, Mail (for Mac)... well any MAPI compatiple software).
The problem is that you will have to redo you newsletter in MS Word, hmm, that's sounds nefarious, but I don't see any solution, unless you find an Indesign plug-in that is capable of handeling this kind of issue. I made a quick search on the net but found nothing, when I say quick I mean it ;-).
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I've found solution via Adobe Acrobat X Pro and a 3rd party plugin called AutoMailMerge by EverMap.
Thank you to everyone who responded in helping me.
Have any of you tried AutoMailMerge by EverMap with a PDF for 1,000+ different emails and mailing them (or emailing) and did it work without any issues? I'm afraid that what if someone else's record goes to the wrong form. I'm thinking of using this tool and sending this to 12,000+ people.