I don’t know about the 500 specifically, but popping and backfiring on a closed throttle is common on engines with carbs. The high vacuum drawn with the throttle closed at high revs can cause the mixture to be wrong, the resulting incomplete combustion means that left over in burnt fuel and air mixture can then hit the hot exhaust valve or even the hot exhausts itself, and cause the popping and banging out of the exhaust.
Some more complicated carbs have extra passages or vacuum operated valve that open to change the mixture on over run to stop the popping and banging.
If this has only started happening since fitting the 123 ignition, I would check the timing first. As suggested above, tappet clearances are also a sensible thing to look at, and I would be checking the idle mixture on the carb.
If none of these things are wrong, maybe just embrace the popping and banging! Haha. The boy racers get their modern fuel injected cars remapped to sound like they’ve got the same backfires on a closed throttle!