I've never heard of a hard limit. I've seen IE slow to a claw if memory becomes an issue and at least one some browsers, it won't display the text properly until all the images have been downloaded.
Older browser versions and/or older computers certainly have trouble with large HTML files and/or lots of images. But, if PG hasn't received too many complaints on this with existing large files, perhaps it's manageable for most people.
Multi-part HTML files are more of a pain in the patoot (you can't search through the whole document, if you want a copy, you have to keep track of multiple files, etc). I don't like them and would prefer all one file.
Ideally both would be available, but perhaps that's something to leave to others. -- Cheers, Scott S. Lawton http://Classicosm.com/ - classic books http://ProductArchitect.com/ - consulting