Question: I'm distributing a chrome app internally at our company and due to spec changes, it will need to include 500MB of files. Will Chrome allow that to be installed? Is there a size restriction?

(This is an App, not an Extension)

Answer: 
Yes, There is a limit of 2 GB while this answer is being posted.

Here is a link for ref.

<https://developer.chrome.com/webstore/faq#apps>
I think not. Google Chromium is not just trying to be a browser or OS for specific devices, its trying to be a platform. See this link from GigaOM:
<http://gigaom.com/2013/05/22/how-google-plans-to-rule-the-computing-world-through-chrome/>

From the article:
"A good example of a native client app is a game I played on my Chromebook Pixel recently called Cracking Sands Racing The app, a port of a game for iOS and Android, was a **533 MB download** to my Pixel and I played it outside of the browser."

Now mind you that this is a packaged app and not extension per say (see the difference here: <http://developer.chrome.com/apps/about_apps.html>). But I would think that you should be able to create bigger extension without much problem. As others have said, a sure way would be to create a dummy huge file and packaging it in your extension.

Just my 2 cents, even though it does not answer your question fully.