Is 500 Mhz 68020 slower than 100 Mhz 68060?
No, you misunderstand. It is not that you have the choice between a 500 Mhz 68020 or a 100 Mhz 68060. It is neither one nor the other; these numbers should rather give you some feeling about the speed of the FPGA solution, i.e. the FPGA emulates a CPU that has approximately the same user level instruction support as a 68060 or 68020 at the speed grades given above, with a couple of missing instructions handled by a software emulation - in the same way the 68060 had a software emulation layer (in the form of the 68060.library).
if they can make a 68020 run at 500 Mhz, why can't they make a 68060 run at 500 Mz instead or even 1 Ghz?
They can neither do one nor another. This is an FPGA emulation of approximately the performance of a 100Mhz 68060 or (equivalently) 500Mhz 68020. Why not faster? Simply because the FPGA cannot go faster, at this time. This is a very small and simple FPGA, with a limited number of cells to program, and with a limited speed grade. There are faster and larger chips, but those are more expensive. Oh, before I forget: There is likely not enough room on the FPGA for a MMU or a FPU, thus integer only, i.e. it is approximately the equivalent of a 68EC060@100Mhz.