If I'm climbing at Vx and I turn crosswind at 500agl and I lose an engine, I would have to make a very tight turn to put me back onto final, not to mention that 500agl isn't enough altitude to even attempt a turn back. Good setup for a stall spin scenario.
If you don't make the turn at 500 and keep going further from the runway, when you hit 1000, you're going to be further away and still 180 degrees from the runway. Staying closer doesn't make an impossible turn possible, but it does make a possible turn get you back to the runway rather than landing short because you were too far away.