Image too large to upload to blog even with updated settings

It sounds like you are setting the overall total quota for the blog to store files, which appears to have been reached. Individual file size limit is a different setting, in Administration > Applications > Blogs > File Storage Settings.

I already have the Maximum File Size set to 500,000KB.

Sounds like you are running into a known issue where an underlying, normally unused legacy setting is being loaded after a regularly scheduled configuration refresh. This causes the setting you see in the configuration panel to be ineffective after that timeout period. This will be resolved in the next service release but in the meantime there is a workaround that involves updating the configuration value directly in the database. Contact support and then can help you get that value updated.

thank you