A well balanced model will sail well. Although in theory a larger model sails better, that is not always true.
I have a Thunder Tiger Victoria, 780mm and I have a Victor Models Mary J Ward 860mm. I have sailed both in very strong winds and rough water. In moderate winds both sail very well and don't take on water. I have also had a Chinese sailboat of about 1m, that only sailed in very light winds, and took on water.
[/size]The big difference was the first two were well balanced and designed with adequate ballast and keel depth. The later was perhaps just copied dimensions with no understanding of design.
[/size]There is no reason why your 500mm boat should not sail well, even in a good breeze. My only advice is, don't be tempted to try and improve on the original design to 'improve' performance. A pilot cutter is not a race boat.