I imagine similar reason why Google Search only shows 1000 results maximum: those who hit the limit are either bots/crawlers or can find work-around (like searching for something else). To be honest realistically who is reading 500 replies to a comment?

One reason is probably practicality. Why store more than 500 replies to a given comment when nobody's realistically going to read every single reply anyway?

Because you would have to be a sociopath to read that many comment replies on a YouTube video.