Why is FFT-based convolution efficient only for signals of large size?
The direct convolution approach has a complexity proportional to $n^2$
The FFT based approach has complexity $n \log(n)$.
Since there are unknown pre-factors and the complexity only holds asymptotically, the only thing one can infer from the complexities is that only for large enough $n$ the FFT approach becomes more efficient.
The $n=500$ threshold is thus probably determined empirically.