Here's my shell:
$ $SHELL --version | head -1
GNU bash, version 4.1.7(2)-release (i386-apple-darwin10.3.0)
Here are my history related settings:
export HISTCONTROL=ignoredups:erasedups
export HISTSIZE=100000
export HISTFILESIZE=100000
shopt -s histappend
shopt -s histverify ## edit a recalled history line before executing
shopt -s histreedit ## reedit a history substitution line if it failed
## Save the history after each command finishes
## (and keep any existing PROMPT_COMMAND settings)
export PROMPT_COMMAND="history -a; history -c; history -r; $PROMPT_COMMAND"
Update
I was able to cause the truncation by using sudo -s. On entering the sudo shell, the history is truncated to 500 entries. What rc files does sudo -s look at so I can make sure it loads my history settings?