I think DC testing is ok, it stresses the insulation (it has the advantage that you don't get a small leakage current due to capacitance that you get with AC).
However, 500V isn't high enough. Even without surges and spikes, the 480V refers to the RMS, the peak line voltage will be 1.41 times this. Even a 1000V megger is a bit low, especially if it's an inverter fed motor on a long lead.
There should be a specification for the motor insulation test (eg 2 x Vline + 1000V, line to earth), and the terminal test should be at least as good as this.
In the absence of a spec, why not stick to your original test?