Ok so I'm finally done reading the whole rule book and the Lizardmen army book, but no matter how many times I read the point counting system I struggle with it. Here is my problem: I have 16 Saurus Warriors with Standard Bearer, Champion, Musician, Spears(11x16+12+6+12) that's 206 points which seems a little lot for a unit. It's the same for my Cold Ones and Temple Guards.
But alas, addition is indeed how you work out points and when your models are more than 10 points a model you do find that the unit becomes expensive quickly. We do have expensive units, a lot of army's core infantry choices are around 5 points so a unit of 20 is only 100 points or so but they are also quite inferior. You usually get what you pay for and multiple attacks at s4, t4, decent armour and cold blooded makes quite a formidable core unit, they are fairly priced.
My 500 point warband has a unit of 16 sarus, kroxigor, skinks and COR in it. Although, it's nothing like a 2000pt game. Most of the LM forces are pretty accurately represented. Small games with elite troops leave a lot riding on die rolls though.
Yeah 500 point games are meant to be very small, they are merely skirmishes. That is why the warband rules exist, so you can ignore some of the normal restrictions like minimum unit size and I believe limit your characters. The warband rules are on GW website. I personally never play below 2k though, that kind of battle gives you a decent sized force to play around with. 2999 can be quite fun, it has the limitations of 2k (so only 1 lord and 4 characters all up) but an extra thousand points, you see a lot more unit focus and less character focus.