Weird. If it does work can someone answer why it is when Rad says it wont?
It is just speculation.
1. To cut costs to the bone to bring a bike at a reasonable price, they never tested or got underwriter (or whatever regulatory or insurance) approval for different configurations of batteries and motors.
2. It is such a loss leader, they don't want to deal with any warranty issues or complications. They don't want you to have too much fun and not buy another more expensive bike. They don't want someone to say I got 40 miles per charge from a big battery with this cheap bike, much better than a Rover.
3. It is relying on the internal resistance of the small battery to regulate power - in an effort to keep the price low. For example, (I am making this up), at full 500w power, it just connect the battery to the motor with switching but without any sort (or much) of other regulation and things are adjusted so that is 500w. In other words, the circuit is not as flexible to keep the price down. The heat sinks are smaller, the capacitors and transistors are smaller, etc. The margin of safety is lower. The connecting of a bigger battery (with lower internal resistance) will allow it to go beyond 500 watts or stay at 500 watts for too long - causing premature component failure.