6.3 litres engine only produces 500hp?
Excuse me? Do you know many similar size engines that produce more per displacement? There aren't that many. Chevy Camaro and Dodge Challenger, for example, have roughly the same displacement and produce 400+ horsepower. And those are sportscars. This is a luxury sedan with quietness and smoothness as priority.
according to German sources the S8 gets the V10 from the RS6 with 600+hp
600 hp would be easily possible and without any negative long term consequences. All they probably have to do is re-program the engine computer.
There are so many 700, 750hp packages available and I am pretty sure all they do is just fiddle with electronics and voila - you have 750 hp.