Not so sure about that. Maybe some of the poor sales was caused by the issues the 750 had, and sharing the "TX" family name surely did the 500 no favors. Something the change back to "XS" for the 650 clearly indicates.The 500 was one of Yamaha's rare failures,, as was the 750 twin....
They should've just stuck with the 650, bored it to 750 and given it a 90* crank like they did with the much later 850. Live and learn...
Looking at its design features, it is really a very advanced engine for its time:
Having the timing chain outboard, allowed closer cylinder centerlines, minimizing the unavoidable rocking couple that comes with a 180 degree crank. So better than Honda twins in that respect.
It was definitely the first multi cylinder street bike from Japan with a 4 valve head, and only Honda 450 and Kawasaki Z1 had DOHC at that time.
The balance shafts had a much better location than on the TX750, and their chain had a tensioner.
48 hp from a 500 twin is also pretty good, the equivalent from a 750 would be 72 hp ( which only the very best XS650 based racers could match), and the equivalent from a 653 cc engine would be almost 63 hp. Which would be very good for a hot street XS650 with a big bore kit.