Alrighty! Here's a run-through on how I keep make my 500px width gifs fit onto tumblr's size limit.
Warning this post is p long. whoopse
Alright so I use Photoshop CS5, but I'm sure you could do this with CS6 and maybe earlier versions of Photoshop. GIMP is a viable replacement, but the quality generally is not as high as it would be if you did it in Photoshop.
Before I open up Photoshop, I cut up the video I want to gif into small chunks. As a rule of thumb, for 500px width gifs, I try to keep each gif clip under 3 seconds.
Step 1: Import your video into frames.
Now for "Limit To Every _ Frames" I usually put 3-4, because it works fine for gaming gifs, and keeps the size low. But anywhere from 2-4 should be fine, just use your best judgement.
Step 2: Make the gif smaller than its dumb original format.
Now, you can keep the gif at this size, 500x281 (a lot of my older gifs are this size), but generally I've found that the gif can still be too big.
So crop it a little bit.
I generally use 500x250, but you can use whatever height you want.
Step 3: Sharpen the gif
Now, sharpening the gif will make the file size larger. But it's worth it, because it makes the gif much nicer. You do not have to, and sometimes not sharpening it makes it just the right size to fit on tumblr.
I use a Photoshop action to do this, because sharpening manually is a pain in the ass and I just can't be bothered to do it. notliketheothers has a wonderful action right here that you can use.
Make sure that when you do this, you haven't deleted any frames. Wait until after you've sharpened to do that, otherwise the action won't work.
Step 4: Play around with the gif
Add your text, change the colors, use PSD's, whatever you want to do.
Then save the gif. Make sure to click "Save for Web & Devices"
As you can see here, my gif is above 1M, which is too big! This happens with nearly every gif I make at first, but it's alright, because there are multiple ways you can fix this.
Lower the number of colors in the gif. Cons: This does lower the quality of the gif, but it can work if your gif doesnt have too many different colors, or is really dark.
You can click cancel, and go back and delete a few frames from the beginning or end of the gif. (I do this when I've limited the frames to every 3rd/4th frame, but if you do every 2nd frame, just delete every other frame to make it smaller). Cons: This will limit how much happens in the gif.
I deleted 8 frames from the beginning of my gif, making it just under 1M. Here's a pro tip, the tumblr size limit isn't actually 1M, its about 1015-1020K, so you don't necessarily have to go under 1M.
My finished gif looks like this:
For reference, this is what the gif would have looked like without sharpening.
Without sharpening, the gif was one frame longer, and a few K smaller.
Also! Another tip!
Making the gif skinnier (like trimming the height down) will make it smaller. If you wanted to make a gif that was 500x500, it would be much much larger that a 500x250 gif.
