Auctions and finding nash equilibrium of a dynamic game Suppose we have a sequential version of an Auction game:
• Player 1 places a bid.
• Player 2 observes player 1’s bid, then places a bid.
• The player with the highest bid wins the item at auction.
• In case of a tie, the winner is determined randomly (with equal probability among
those tied).
• The winning player pays his bid.
Two players bid for a rare bottle of Scotch. This is an auction in which they
can bid any amount in $\Bbb R_+$. Suppose the two players both value the item at £500.
Find all pure-strategy Nash equilibria of this game.
The answer provided didn't seem too intuitive:

Player 1’s strategy is to bid 500.
At the information set following 1 bidding 500, Player 2’s bid is in [0, 500].
At all information sets where 1 bids any x1 below 500, Player 2 bid is in (x1, $\infty$).
At all information sets where 1 bids above 500, Player 2 bids anything in $\Bbb R_+$.

I somehow get that we do NOT need to consider sequential rationality, but how does point 4 follow i.e P2 bids anything in $\Bbb R_+$?
Any help will be greatly appreciated.
You are only required to get Nash equilibria and not sequentially rational/subgame perfect equilibria. Hence Player 2's actions at information sets that do not occur (that do not reflect Player 1's actual strategy) do not need to be best responses. All you have to make sure is that no one is better off by deviating.
In case 4., regardless of what Player 2 does, Player 1 cannot get a positive surplus; she wins with a higher than 500 bid or loses. This is not better for her than bidding 500 and losing.