Yup, I think I see the problem right there. I'd suspect a head gasket first. Or you lifted the head (Slight difference in outcome but not the same cause).
500 hp is the normally quoted max figure for stock components to live at.
I've heard the connecting rods are the weak link in the rotating assembly. Balancing should provide better reliability and a good investment while you're in there and aftermarket pistons are added. Unfortunately the aftermarket rod offerings have poor reviews or I would have added them also.
Even with forged pistons and a balanced rotating assembly I'm limiting output due to the inability to put 500+ hp to the ground without extensive chassis modifications and increased driving skill.
I don't know what kind of answer you were expecting from this thread. I don't believe its possible to accurately calculate the amount of power stock pistons can support. Your results will vary depending on too many factors. You can look at what other people have done if you want a benchmark. You may not be able to achieve the same power level or you may be able to exceed it.