Now, who would tell you a thing like that? A Friend? I just tried it. I don't use PAF 4.04 for much other than checking out people's problems, so I don't backup much. Anyway, I have 7272 individuals in my database and it takes up 4,748KB on my hard drive, but only 864KB after the backup utility compresses it. So, I think you are probably getting many more than 500 individuals on a floppy backup.
The best way to check for sure, is to restore one of the backups to another folder and see if everything is there. Restoring seems to have a mind of it's own as to where and under what name the backup will be restored.I think that the easiest way to be sure that you do not overwrite your database with the backup is to RENAME the backup file before restoring it.