Umm, no, that's wrong. The maximum is NOT 500m. That'd only be the maximum if everyone lived on the arterial road with the line.
I think that 2 stops/1km in places with 1km block widths (i.e. in Scarborough) or 3 stops/2km in places with 2km block widths is about optimal.
It would be optimal in a dense, urban setting like Toronto south of Bloor street, or Paris where, as Daniel mentions, the city is famously known for placing a metro stop within 500m of everyone's house. Of course, the city of Paris has an
average density that's higher than St. Jamestown and a street layout that's wonderfully suited for pedestrianization, with little warrens and mewses that jut off in every direction.
The residential side streets of Scarborough, however, are very suburban in nature, with single family detached homes on sidewalk-less cul de sacs and crescents. Moreover, these areas are filled with NIMBYs who are resistant to densification, and the price of property acquisition is too high and the demand for living in these areas too low for any reasonable developer to buy up these subdivisions at market value, demolish them and upzone them for higher density. Other than highrises at arterial intersections, the built form of suburbia isn't going anywhere.
And because of this, there is no reason to have intermediate stops on a rapid transit system through suburbia. There is no need to build a stop at
Massie St. and Sheppard Avenue because the stop will generate as much ridership as a bus stop, and all of the ridership will come from the handful of people who live in the adjoining cul de sac who take public transit. What suburbanites need from their transit system - and above all, their
rapid transit system - is speed. They need to travel through the miles of subdivisions and industrial parks at a speed that is competitive with the car. That's not to say that LRT can't do this. It can, and for those who doubt that on street LRT can't travel fast, I invite you to go to Seattle where you can travel from the southern edge of downtown to the Airport (a distance of over 20km) in about 22 minutes. But, what we can't have is a light rail line, or any form of rapid transit, that serves as a milk run.
Again, you can do this downtown or in Paris because the ridership generated at those stations every 500m is significant, and because the distance needed to travel to destinations is quite small. Additionally, consider that the frequent stop spacing of the Metro system led the regional government to create a secondary rapid transit network - the RER - for longer distance, regional rapid transit needs.