DodgyPutter:
It seems to me that if after my 500th ranked round my average, irrespective of what it is, should then drop every time I score under net 68 (probably 70 or more at first) as that score will replace my highest. My doubt about this arises mainly as I've often seen people say that to drop your average you need to score below it, and that seems more likely.
Different action on a pre-saturation average and after.
Below 500 rounds counting, it is a linear average, behaving like we all know it. For this it's true, it will only drop when a lower than average score is added.
In the first lines you speak about a "saturated" average, and this is non-linear because a value is replaced. This kind of average may drop - as a sign of crossing the line - even when the new score is higher.
Simple example: Take scores of 10, 20, 30 ... 90. Nine scores forming an average of 50. Linear, it's obvious that scores below 50 will pull it down, scores above will raise it.
Saturated, a new - lower - score may replace an old - higher - one. Thus, a 60 will replace the 90 and cause a drop. And, since the difference of 60 - 90 is involved, the drop will be significant. These two signs are well visible in Legend averages.
DodgyPutter:
Also as a legend I can't remember my ave going down, (I also can't remember how long that's been so wouldn't swear about the earliest times but certainly in recent months) so prior to saturation where were the 500 scores coming from that only allowed it to drop? (TM rounds? I know, the average is reset so I suppose not).
Correct. These 500 have been played as a Legend, starting as a new Legend, not used to the new situation => higher scores. A reasonable difference may be 65 - 80 when saturation starts.
Yes, it is that easy then.