Auctions and finding nash equilibrium of a dynamic game
You are only required to get Nash equilibria and not sequentially rational/subgame perfect equilibria. Hence Player 2's actions at information sets that do not occur (that do not reflect Player 1's actual strategy) do not need to be best responses. All you have to make sure is that no one is better off by deviating.
In case 4., regardless of what Player 2 does, Player 1 cannot get a positive surplus; she wins with a higher than 500 bid or loses. This is not better for her than bidding 500 and losing.