It would report two configurations, one of them self-powered (implicit 2mA), the other bus powered (500mA). The device would refuse to enter the self-powered configuration when the external power supply is not connected.
This means that if there is less than 500mA available, e.g. because the device is connected behind a bus powered hub, the host would eliminate the bus-powered configuration and attempt to set the self-powered one. If the external supply is present, this succeeds; if it is missing, configuration fails, as it should because there is insufficient power.
Ideally, you'd put the bus powered configuration first; this becomes the preferred configuration. If the device is bus powered and the external supply connected, that is fine, and no change of configuration is needed, and the external supply can be removed later on with no issues as well. If the self powered configuration is active, the device may not draw power from the bus, so disconnecting the power supply requires you to shut down the device and force re-enumeration by disconnecting the sense resistor.