Having a 350cc as a pose to a 500cc does not necessarily work better. The 350 cc engine does not have as much power so when you come into a corner, the 500cc will turn easier. The 350cc will tend to drive more, and in doing this will try to straighten up, so it then makes them more dangerous to ride really.
Basically, although they have more power, the 500cc has the advantage of having a little added power which can get you out of trouble - It just comes down to the throttle control of the rider. And I am not just telling you the theory, I actually ride both 350cc and 500cc JAWAs (not that the make of the engine means any different) week in week out throughout the season.