oh man. I got to this thread late..
you should have pulled out at this stage..
There is going to be some back and forth here.
1. should have had a contract. even relatively small values, should have had a contract set up stating possible alternatives.
2. should have researched more.. His skill clearly does not seem up to task.
3. 5'x6' is no joke. Even if it had been a GOOD pencil sketch, the ability to scale that art up to 5'x6' or mural size is another skill on its own.
art board is 11"x14" hell, I wouldnt be able to scale up to 5'x6' without spending weeks/months prepping.
4. Commissioned art usually has that prep work built into the price. Something people often miss. 1 piece of art, may have 50-100 prep sketches, test render/paintings, etc leading up to the final artwork. Especially true with paint, and not using photoshop. if you are going to paint a complex image of lets say a knight in the forground, a pirate ship in mid, and castle in the background. you may paint 5-10 versions of that knight, first, and same with castle and ship... then, recreate them together at once on the main canvas. True pro stuff, like book covers, magic cards etc. often that stuff is 1 piece of art for an entire months worth of work. nevermind hiring models, or creating actual props.
5. its possible... but super unlikely that guy is going to turn it around.
6. the "right" thing would probably be to fork over the full $500, as sad as that is. time and money on paint was spent. 5'x6' is again, no joke.