I got my XB700 first and then purchased an XB500 also after reading the opinions on this forum.
My first impression of the XB500 having used the XB700 is that they are dinky. The pads are considerably smaller, and it puts them in a fairly uncomfortable grey area where I have to choose if I want the pads resting on the very edges of my ear lobes or if I want to fold my ear slightly so they fit inside. I strongly prefer the larger pads that don’t touch my ears at all.
As far as the actual sound, the two are quite different. The XB500 definitely isn’t just a smaller version of the XB700 with a similar sound signature as you might expect. The XB500, using no EQ at all, sounds surprisingly good. I think it might be the only headphone I have that I would ever consider using without any EQ. To that end these would probably be my first choice if I was listening using a portable device such as my Droid. In my case however, listening via portable devices makes up less than 1% of my listening sessions and I have no aversion to actually using EQ.
While the XB500 has the edge when it comes to its stock sound signature, the XB700 with its 50mm drivers is simply able to do things that the XB500 and its 40mm drivers cannot. If you listen at loud volumes, clear differences emerge between the capabilities of the two headphones as evidenced by the degree to which the bass negatively impacts the rest of the sound spectrum. With the XB500 there is clear degradation of the sound spectrum with heavy bass; with the XB700 this is not the case. I should note that my DT770/Pro 80ohm headphones also use 40mm drivers and suffer from the same issues as the XB500 in this regard. The clarity of the XB700 in these extreme heavy-bass situations really makes you feel like you’re listening to something special.
Although both the XB500 and XB700 are fairly easy to drive, I do feel that the XB700 in particular benefits from a good high-current headphone amplifier. Prior to getting my XB700 my primary headphone amplifier was a Little-Dot II+. This OTL (output transformer-less) tube amp was only capable of delivering <100mw to headphones rated at 24ohms and it was obvious that the XB700 was running out of gas. While being 24ohms makes them easy to drive in a certain regard, the lower end of the spectrum is still the most power hungry and the XB700s can suck up a LOT of power. I purchased a Little-Dot I+ which is a hybrid amplifier and uses transistors for the output stage. Where I was getting <100mw before at 24ohms I am now getting >800mw with my new amp; The XB700s are in heaven. Supplying the XB700 with proper amplification goes a long way toward closing any remaining deficiencies they might have compared to the XB500. While I found that the XB700s lacked the mid-bass punch of the XB500s when powering them from my old amplifier, once the XB700 had enough power at its disposal the gap closed to where the XB500 now only has a negligible advantage if any. I guess the lesson is that these 50mm drivers simply require more juice than 40mm drivers to perform their best.
When I got my XB700s, I mainly just wanted them as something I could mess around and have fun with. I would have never expected that they would have essentially replaced my DT770/Pro 80’s as my main everyday headphones, but that is exactly what has happened. With EQ I find that even the midrange and the high-end on these headphones is very good. That headphones with such capabilities are so cheap is pretty amazing, it’s definitely a good time to be in this hobby.