When I first shot the 504 it was a solid 2 inch shooter!
I bedded 2 inches in front of the magazine with marine tech. it went to a neat gun 1/2 to 3/4 inch groups , I expect more as I am concidering placing some bedding around the trigger area , however not much room in that area. I might work with the area of the rear lug bolt.
I had this same problem with the Thompson Classic Benchmark , its ok now and shoots great.