There's nearly 400 toons in the game. Meaning at 6 mods a toon, you've got reserve/flexibility for about 80 toons, give or take (if you keep them all modded, which of course might not always be needed, but presume they do just in case). That's also things like 5B mods with 9 speed, that you might not want to *sell* right now, but might want to slice up when you get more mats to see if it rolls into a 14-speed 5A mod.
500 does feel limiting. Especially as a HotUtils user, seems like every time I push a remod I have to sell ~70 mods from 350 down to ~280 or so just to get the remod into the game.
The mod system needs love (well, realistically, for CG to stop taking other people's work for granted and do something), and a cap increase is part of that. That said, CG should be thanking Hotutils, because if not for HotUtils, Mod management would've burned out a hell of a lot of the top people in the game.