What CPU/GPU are you using? What game are you playing?
Are you monitoring CPU/RAM/GPU utilization?
Simply speaking, streaming will (potentially) take available hardware resources away from the game, unless you have more cores/RAM that the game(s) aren't utilizing.
As for why it would still show 500FPS? That's very odd as I'd expect to see drops there if it's not feeling as "smooth"....
That being said, you might be locking up a little, and resources aren't available to refresh an FPS counter consistently, so you might be experiencing stuttering there - where it should be showing a drop to <100FPS, but there's no resources available to refresh the counter, so you still see 500FPS? Would be very, very strange, and a complete guess on my part.