Mach can do safely 45KHz per axis (some guys can get as much as 100KHz and more, depends on computer/port etc) so thats 45,000 steps per second. With your 500 encoder thats 2000 per rev. 45,000 /2000 =22.5 Revs per second =1350RPM.
I am thinking of doing this on the mill I am retrofitting at the moment, I have a 5KW AC Servo but I will be using the smoothstepper for this machine and that means I have a max pulse of 4MHz, my encoder is 2000 line (8000 as far as Mach is concerned) so I could spin my motor at 30,000RPM if it would do it without flying into ten million bits LOL. 4000 is its max so I have plenty of headroom.
Hood