500GB is not mandatory...it's the size recomended taking in acount OS instalation and the predictable instalation of a bunch of games, movies, etc. that you might want.
It's like there is a minimum size for HDD that comes with a XBone or PS4....
As for the "1TB" demand, i believe that there is a typo there but i'm not sure....the .zip is little more than 2GB and no matter how much is compressed it can not expand to 1TB, not to mention that 1TB demand contradicts the 500GB recomendation.
Oone of the possible explanations for the 1TB is that SteamOS seems to include a recovery option , if something goes wrong, that will recover everything , including games, in the HDD....so , it's a kinda mirroring software that mirrors the 500GB minimum recomendation and so, we got to 1TB.
However, i bet you can install this in a 320GB HDD and even with mirroring option, you get 160GB.
At 1st mirroring is a waste of HDD space but then again, it will make it so easy to recover for something catastrofic happening to your instalation.
Another thing is that Steam says that only NVIDIA is supported and indeed, NVIDIA video drivers are the best right *now* under GNU/LINUX and it will take some time, maybe some months, to AMD be on par with NVIDIA under GNU/LINUX.
However, FWIW, SteamOS image already includes AMD Catalyst and Intel video drivers.