You are completely right that there is nowhere near enough smerit to go around, I suspect perhaps theymos is going to increase it after the initial smerit distribution is allocated, but he will need to increase it by a very large amount to even make a dent. Distribution of merit aside, I don't think the idea is that an average user should post 500*50= 25 000 posts to become a hero member. I also don't see theymos having the time to add and supervise hundreds of smerit sources.

Another point you didn't mention is that posts after the first few replies are much less likely to receive any merit as they won't be seen much, maybe it is good in the sense that some of those huge useless threads will be less lucrative to post on but it also gives less incentive to continue posting on good discussions.

As for distribution of merit, we can already see from the stats theymos posted that most of the merit is going to a few well known people in the community rather than being distributed evenly to good posts. Also it seems this meta section has been the one section where most of the merit so far has been distributed to.

Theymos also asked people to merit posts of high quality rather than posts they agree with but just as with likes on reddit this will never happen.