Europe ended up with 500 top ends on 550 bottom ends from the factory,had to use up all the 500 barrels?
Nah that one linked up here is a homebrew one-off. They even wiped out the casing number partially, to "hide" the fact that it doesn't belong on the bike.
Someone probably did indeed break the 500 transmission on this bike, and proceeded to put his good 500 barrels on a 550 box.
Europe had the CB500 and CB550 sold beside each other for a while, with different transmissions. The 550 was not an outright successor like in the US.
So you could say they had to use up the 500 barrels as well as the transmissions :-) But apparently chose to do that in Europe only.
The CB500 continued to be sold (with small updates) until about 1977. Problematic or not - that I don't know, but last I heard, Deltariders' example was still working

Beside the red bike I also own a late model 500 transmission (i.e. one of the years where it was already discontinued in the US), but I have yet to find out if it still works.