I'm hoping to create a form where our leads can submit information about themselves with a 500 max character count. Is this possible with Marketo forms? Do the questions have to be Marketo fields?
The information (I believe) will have to be stored in a Marketo field somewhere. You can phrase the question any way you want on the form itself (the question doesn't have to be worded the way the field name is), but it will have to feed into a Marketo field on the back end.
When building a form, you can have the field's display name be different from the field name. Therefore, you can have the field name be "Question1" but the display name be "What is your answer to Question1?". Marketo calls the display name "Label". See screenshots below for Form 1.0 as well as Form 2.0.
Stephen is correct that you'll need a Marketo field to hold the data - but you can limit that field either from the form (using the max length delimiter) or you can limit the actual field you create in Marketo to only hold 500 characters (however it's probably best to do the form limit or both -- otherwise, don't let your form allow over 500 if your field only holds 250)
This may also depend if you connect this with SFDC field and the character limits. Most String fields are 255char, while TextArea may be more.
In addition to setting the limits on the form field and backing field as others noted, you could also throw in a visual helper like MktoForms2 :: Textarea Char Count.