Now it's 500k, the entire concept of ISOs is actually somewhat useful. Exercising a bit each year doesn't have hilarious consequences where the tax cost to exercise is 4 times more than the strike price itself.
In my experience, small startup options don't get exercised because of the tax bill, not because of the strike price.
You still have to watch out for the California AMT (which I didn't know about) - it's 7% and will still trigger at the lower value. As a bonus you can no longer deduct it either past 10k from federal taxes (though that may change with the charity thing).
The ability to do early exercise on unvested shares is also often not an option at startups so when you are able to exercise the spread is higher and the tax penalty is worse.
In my experience, small startup options don't get exercised because of the tax bill, not because of the strike price.