crab,
I too am a UK military pilot that was brought up on QFE and I was undergoing flying training when we went over to QNH for a short time. I remember thinking that sense had prevailed when we reverted to QFE. However, after many years of flying around the world I am now strongly in favour of adoption of QNH for the following reasons:
1. Standardization. Just about everywhere else in the world uses QNH, including the majority of aviation in our own country. During the cold war we operated almost exclusively in UK mil environment, but nowadays deployed ops are our raison d'etre and virtually every fleet is undertaking QNH-based ops somewhere around the world. Interoperability is improved by adopting worldwide practices.
2. Training. As we have to adapt to QNH on ops - why even create a difficulty by having a different practice at home. Train as you fight?
3. Terrain awareness. Having QFE set whilst being vectored on an instrument approach removes a lot of terrain awareness from the cockpit. Yes, you know how high you are above the airfield, but its much harder to build awareness of separation from the surrounding terrain. In practice, this puts the onus for terrain avoidance totally on to the controller. The relationship between the approach minimum and height above the runway is quite easily read from the plate, but I suggest it is much harder to mentally calculate that 2000 feet QFE is safe separation from terrain which is higher than the airfield. I believe that use of QFE creates pilots who are culturally trained to place a great deal of trust in ATC not to fly them into a hill. Perhaps that's fine in RAF Lincolnshire, but what about in Kabul or even at Nellis? CFIT happens when aircraft fly into hillsides, not when they fly into runway thresholds. Which pressure setting is better near mountains?
4. Combined zone pressure settings. It is utter nonsense that aircraft land at Kinloss on the Lossiemouth QFE, whereas a zone QNH would be entirely reasonable.
I can see the logic of the arguments for QFE and historically, in the isolation of ops from our own airfields in UK/Germany, it worked. However, with smaller but more deployed forces I think it is time to wake-up and realise that we swimming against the tide. The transition will be painful for those fleets that don't deploy and for mil ATC - but an expeditionary force really should not be so parochial.
To address the original question. Most military aircraft can accept a 500 foot clearance as they are not subject to the ANO. The military controller is trained to apply military rules and may not have knowledge of regulations contained within the ANO.