@jamiedolan - Thanks for the feedback, and the compliments!
One thing you should probably keep in mind is that our customers almost universally substantially overestimate how many online users they have at any given time. I think this is largely due to forum software (including vBulletin) estimating the number of online users very poorly. It is usually off by a factor of 2 or 3 or more. Here's a forum, for example, that vBulletin claims peaked at 3417 users online, but I've never seen it over 400...
http://www.w8baby.com/forums/forum.php
500 simultaneous users is a truly enormous site. The vast majority of our customers use and are happy with our Free or Basic plans. I'd encourage you to give one of our paid packages a (free) try and see what kind of usage you actually need. I suspect you'll find that you need a much cheaper plan than you realized. (We had a customer sign up the other day *convinced* he needed 3000 simultaneous. In reality he needed about 75...)
As far as self-hosting goes. It's not as simple as it sounds. I'm guessing your server runs apache -- if so, it wouldn't be able to handle 100 chatters much less 500. Apache just isn't built to handle that type of usage. This isn't to say you couldn't run a different server and learn how to set up real-time software up -- just that we've decided the support and usability costs of having a do-it-yourself version just aren't worth it.