Hi PK,
The result is intended one and its working as per standard design.
if you want the orders should be generated only for 500 Then your min qty should be 499/500 as well. i dont know you would handle other situations with this logic.
if you're going to use this logic only for specific products then you can go ahead or if you strictly going to restrict the orders with specific qty you can try with fixed lot sizing in Product master.
Regards
Vinoth