Is the reason they have to drill down 20 km to 500C rather than say 7 km to 175C (presumably a far simpler task) is the equilibrium heat flow?

That is, the water/steam cycle is extracting heat from the surrounding rock. That can only be extracted at a rate that matches the heat inflow, or ideally, ever so slightly less, so as to maintain equilibrium over decades over cubic miles of rock.

Yes, I understand that larger temperature differences increase thermodynamic efficiency. But if the energy produced is constant, efficiency may not matter as much as ease of construction etc.