Is it set at 5050? I can't remember. Also what actually happens when you do hit the rev limiter - can it damage the motor?

Depends on what year 502 and what ignition. A 502 efi/mpi with a TB V is around 5050-5100 rpms.
When it kicks in it feels like a hard miss in the engine. as far as hurting anything???? Maybe if you are constantly hitting it for a long time. Not sure if the TB V Merc cuts out spark, fuel or both.
I know my TB IV limiter just cuts out spark.

I'm told the 502 MPI is set at 5150 rpm

I'm asking about a 2000 502 mpi/efi

I bleieve it is 5050RPM and it only cuts out spark, it won't damage the engine as long as you don't ride the limiter constantly, this can cuase the rings to wash out from all the raw fuel dumping into the clyinders and not being burned. I don't know why you want to ride the limiter anyway it sounds horrible and you aint gonna go no faster.