I have a View with 1,000 potential items. When it is paged, it works perfectly, both with Ajax paging or normal paging. But when I try to switch off the display type, the server throws a Server Error 500. No log in the watchdog table of the database or any other registry. I guess that there must be some problem with memory or something, but I would expect a PHP memory allocation error or something. It is not practical to show the 1,000 items at a time for the first time, but if I would want to change to some Page scroll pager like jScroll, I am worried that this is not entirely possible in Drupal.
Answering your last statement displaying multiple nodes at once is totally possible in Drupal. (Bear in mind though the power of hosting and caching is something to consider.) Unfortunately, the 500 error isn't helping a lot; a good approach is checking the error logs for any indications there.
If you are suspecting a PHP memory allocation error, try increasing the memory_limit variable in php.ini to a higher value. This link might be helpful.
Displaying thousands of nodes at once needs caching, so your site can be nice and quick. First, enable the caching in the advanced section of your View UI. Also consider using modules like memcache and boost.
As I said, first check what this 500 error you are getting is, because maybe it has nothing to do with the amount of nodes you are displaying.