Even though I have both, I wouldn't hesitate to do the railing with the DF500 if that is all I had. Even with the DF700, I wouldn't mortice much deeper than a DF500 is capable of doing. I would not stack the tenons vertically because that may weaken the softer fir 2x6. Instead, I would use 2 or 3 spaced horizontally. Just make sure to leave space (web) between them, or you will also weaken the fir 2x6 substrate. Oh, I would also not center the mortices vertically in the 2x6. Your 2x6 substrate will remain stronger if you position the mortices slightly below center (vertically).
Because you are morticing into the 4x4 post across the grain, you won't appreciably weaken the 4x4 substrate by placing the mortices near the outside edges (with the 3rd one in the middle). So if you use 3 mortices, place one in the center and the other 2 near the outside edge of the 4x4. This positioning will still leave a lot of "meat" toward the edges of the 2x6. It is the 2x6 that will be the weakest of the components, so you want to maximize its strength when determining your mortice locations.
