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I know the personal ship limit is 500m, but i've seen some players in major factions that own larger ships like Destroyers. Is this normal or is there some other reason?
Well, say I write that my character owns a 600-meter ship. Technically, it's the faction (or corporation) that owns that ship, not my character. If my character leaves the faction, I'd need faction administrator permission to transfer it to another faction or corporation capable of owning it.
You can "command" any ship you want, if the Major Faction leaders/company approves. But they have the right to "take it" from you. Typically thise allowed to command, majors won't take it because ooc reasons