Reducing further to 500 ft separation is not safe with current aircraft models.
One reason is because of wake turbulence, this is described by ymb1's answer. Another, perhaps more compelling reason, not to use 500 ft separation is that it inevitably will lead to mid-air collisions.
The actual metal-to-metal spacing between aircraft in RVSM is often below 1000 feet. This is because of a number of factors:
- physical aircraft height: e.g. an A380 is approximately 24 meter high. That is 75 feet.
- deviations from the assigned altitude. For example overshoot/undershoots of 150 ft are acceptable when levelling off; brief deviations of 75 ft in cruise are not uncommon.
- altimeter system error: the altimeter does not always indicate the exact pressure altitude; errors of up to 245 feet are possible for RVSM compliance.
It is easy to see that the sum of these components easily can eat more than half of your proposed 500 ft separation. If two aircraft on adjacent 500 ft separated flight levels have a bias toward each other, a collision will be the result. 500 ft separation is just not safe with the current aircraft.
In order to keep 1000 ft separation safe, aircraft operating in RVSM airspace are frequently monitored by RVSM regional monitoring agencies. They verify aircraft altimetry systems are operating within safe tolerances based off their transponder signals.
For the RVSM safety case (see ICAO DOC 9574), a total vertical error (TVE) of up to 300 ft can be tolerated by the monitoring agency.
The TVE is the sum of the Assigned Altitude Deviation (AAD) and the Altimetry System Error (ASE). The ASE may never exceed 245 feet.
The AAD is the result of small vertical disturbances and the altitude control system reacting upon that. Autopilots typically keep the AAD within 50ft, but some situations may degrade the height keeping performance.
Ideally the ASE is 0ft, but in reality there is often a bias in the altimeter.
ASE can be caused by:
- Damage to static ports and pitot tubes
- Pressure leaks in
pitot/static pipes
- Air Data Computers out of tolerance
- Poor paint finish in static port sensitive areas
- Inadequacy of RVSM inspection procedures
- Component life span
- Non-optimised Static
Source Error Corrections
- Pressure variation caused by skin
waviness effects

source: EUR RVSM RMA/Skybrary
If the RVSM Regional Monitoring Agency notices that an aircraft is trending towards the 245 ft limit (action is initiated at 180 ft error), they contact the aircraft operator so that corrective maintenance can take place. This way they ensure that RVSM with 1000 feet separation remains safe.
Below is picture of ASE measurements of a single aircraft that developed an altimetry error of 150ft within one year. The operator performed corrective action after being contacted by Eurocontrol's RVSM RMA. Thereafter the ASE was around the 0ft mark.

source: EUR RVSM RMA/Skybrary