As someone who went from an '09 500 to an '18 400, I have to say that's the practical way to do it. The 400 has slightly less power on paper, but the EFI helps a ton. In normal riding, it feels a tad lower in torque (just doesn't quite have as much grunt as the 500 did), but feels better in every other way. It's still the budget Ninja, but it does have slightly better better stuff (like bigger forks) and modern features, plus an amazing aftermarket. The top tuners are getting 60hp out of them (with a lot of work admittedly), and they're a tad lighter than the NewGen. In my eyes, it really seems to be just about everything you'd get out of a swap like this, plus some other upgrades.
But I do appreciate the work you're doing. If you enjoy it and want to make something unique, it's worth it. If you keep up to your standards, I think it'll be a great bike when it's done.
Thermo-Bob stuff has become a bit of pet project for me (with a lot more theorizing and planning than actual doing). If you're going to use the stock EX500 thermostat housing, I have an idea for how you should be able to mod it to basically build a Thermo-Bob into the stock parts. The remote thermostat is really good at staying cold from lack of flow, which keeps it from opening, which keeps the coolant from flowing, which keeps it cold... The dual coolant outlets on the engine make it more annoying to mod than most of the other little Ninjas, so I'm not sure if you had planned to use the stock parts there or fab up something else.