The treasure generation can be found at least in the fifth edition rulebook, section 3.2.
The fourth edition also seems to have treasure generation tables.
Such tables do not exist in the first edition.
Yet another alternative to the other answers, and one you touched on in your question - selling it for gold.
So the entire necklace is worth 750 gold, and the ruby alone is worth 500 gold.
The ruby weighs very little (let's be nice and say it weight around the same as a single gold piece) - so in rough numbers the ruby is worth 500x it's weight in gold (...
Pricing in DnD is largely just a mechanic to restrict access
The 500gp is the barrier, not the mechanics by which the item is gained. Either the item is given as a reward for a task done and worth 500gp or the item is bought with 500gp worth of gold earned. Either way the DM has a method by which to reward the characters with something which opens up more ...
Unless your GM rules otherwise, you can use a real world analogy to crushed ruby, diamond powder.
Diamond powder of an appropriate grain size (around 50 microns) burns with a shower of sparks after ignition from a flame. Consequently, pyrotechnic compositions based on synthetic diamond powder can be prepared.
If you do want some effect from crushing gems ...
It's up to the DM.
Having said that, D&D pricing doesn't make economic sense, so the answer I prefer1 when I DM is that is you get 500gp worth of dust out of 500gp worth of rubies.
The game also doesn't specify any other properties than value when it talks about most gems. Maybe the price is exactly proportional to weight, i.e. a 500gp ruby is equal in ...
In addition to the other answers, a fantasy ruby has the same mundane uses as real ruby; bling.
If you turn up to the king's party without fancy jewellery you will stick out like a peasant, maybe even mistaken for the help!
Roleplay opportunity is often missed in favour of 'what do the rules say'.
As an example my kobold once found 500 x 10gp gems and a wolf ...
In addition to existing answers, there are spells that require gems or crystals in general, and ruby is both. Here is the list of the spells I found from Basic Rules:
Teleportation Circle - Rare chalks and inks infused with gems 50gp
Contingency Carved ivory and gem crusted Statuette of yourself 1500gp
Heroes’ Feast Gem-encrusted bowl 1000gp
Magic Jar Gem, ...
There are several spells that require ruby dust as material components:
Continual Flame (50 gp)
Forbiddance (1000 gp)
Force Cage (1500 gp)
Imprisonment (500 gp per HD of the target)
Sequester (powder composed of diamond, emerald, sapphire and ruby dust worthing at least 5000 gp)
Simulacrum (1500 gp)
Your ruby allows 10 casts of Continual flame or it allows ...
There are several spells that use rubies, generally by crushing them.
Continual flame uses 50GP of ruby dust. See Basic Rules, pg. 227
A flame, equivalent in brightness to a torch, springs forth from an object that you touch. The effect looks like a regular flame, but it creates no heat and doesn't use oxygen. A continual flame can be covered or hidden but ...