How, but most importantly, why [not] to increase the post limit to something like 1000 chars?
In the “why” department, it would be great to hear some past experiences from admins who have already done this configuration change and whether it’s affected their communities in any way.
I find 500 characters usually enough for what I need to share. I prefer keeping the long form of conversation to somewhere more stable like this forum or a static web page that I can link in a toot. Using a short limit also forces concise expression, which I find a good exercise.
I think it is up to the admin and the instance’s community. Hubzilla has no character limit, and it works just fine, even over ActivityPub.
What is interesting is that the 500 character limit in Mastodon only applies to local users, and anyone posting from a different ActivityPub client is not limited to 500 characters, and their full message shows up in Mastodon. It sometimes confuses Mastodon users (i.e. “how did you do that!?!?”) because they don’t realize the restriction is only on them. The rest of the fediverse is not limited to 500 characters.