While I would agree that using smaller bits with an adapter wouldn't likely cause a gear problem, I do think it's a potential safety problem, as it is a safety problem to use any tool for a different purpose or for jobs for which it wasn't designed. In this case, I would think it's more likely that, because the 700 has more mass than the 500, the smaller bits would be under more stress in the 700 and more likely to break off. The user would also be more likely to put more stress on the smaller bits than for which they are designed. Plus, I would suspect that, using the 700 for small jobs would be, at best, cumbersome. Festool's warranty is a great one, but they have the right to restrict coverage to use with their own accessories or approved accessories, regardless of whether we believe it was the cause or not. Having said that, I'm not sure why this was an issue. Did the user tell them he owned and used the adapter? Did the user include the adapter with the tool when sent back? Barring those two possibilities, I would agree that Festool wouldn't know for sure and would likely have to cover the repair.