When we compress Elo ratings, we also reduce confidence interval. Basically the way Elo works (and you can read more about it here: http://en.wikipedia.org/wiki/Elo_rating_system) is that the system has the ability to tell how sure it is you're in the right Elo bracket.
At one game, the confidence rating might be very very low because heck; it has no data to determine how good you are!
At 500 games, it's probably pretty sure exactly where you should be, so you'll lose/gain less because the confidence is high and you're much closer to where your true Elo is.
For example, right after the reset I was losing 33 per loss and gaining 30. Now I'm gaining 20 and losing 20. It'll continue doing automatic math in the background until I reach a good confidence level