Yeah, I won't disagree with you there. You can check elsewhere in the thread if you want to see more details, but in summary: the specific combination of heavy loads and steep hills (take away either one, and 250 W is easily sufficient) do make a 500 W limit more necessary.

Can you explain why?

Look at the comparison I did elsewhere in the thread. One hill I know of and have climbed many times, going up at just 12 km/h, I'm putting out over 500 W at some points. And that's on a carbon analogue bike, as a lighter-than-average dude, carrying nothing more than a bottle of water. I'm out of the saddle, working my arse off to get up that hill.

As a cycling advocate, that's unacceptably difficult. Great for when cycling for fun or fitness, but as an advocate, I do not want people to have to exert themselves that much just to get around. I try to set a baseline effort of 100 W, but up to 200 W for brief periods is not unreasonable. 250 W (plus a 250 W motor) when climbing up a hill even with the lightest possible load, which would easily become 500+ W (plus the 250 W motor) on the way home from shopping or transporting kids to their cricket training, is not reasonable. I want cycling to be accessible to as many people as possible. It has the potential to be a far more accessible form of transport than driving is, if our network design and laws allow it to be. A Dutch-style network is by far the most important thing and would work for 80%+ of potential cyclists, 60%ish of the time.

But to get that last 20% of cyclists 100% of the time, laws designed for the famously flat Netherlands are not necessarily appropriate. And that could include allowing up to 500 W motors. Especially with the NSW law, which states the power must be

progressively reduced as the bicycle’s speed increases beyond 6km/h.

So (assuming it's linear), at 16 km/h you'd be getting about 250 W of assistance, maximum. At 20 km/h you're down to 132 W, and at 23 km/h it's just 52 W. To do that 12 km/h up the hill I was talking about, you'd get about 340 W of assistance, or go down to 10 km/h and get 390 W, plus 1–200 W from your legs, which should be enough to get an older or less physically capable cyclist up the hill with their shopping or (grand)kids.

Yeah, my current bike has a power scale setting. Adjusting the pedal assist directly adjusts the max power output. And at the 250W level, I work up a sweat whenever I push it.

Which, again, is fine, if the bike is just for exercise or commuting. But it stops it from being a viable car replacement.

I run. I cycle. My road bike has 15,000km on it. But I can't do the things I need to do on a 250W ebike easily enough for it to replace a car in my daily life.

I could do all of the things you're talking about if my goal was to give myself a workout, but when the goal is to use it instead of a car, 250W doesn't cut it, because I'd be dripping in sweat and worn out half the time.