O limite é codificado em sqlite3.c e é definido como 999. Infelizmente, ele pode ser alterado, mas apenas em tempo de compilação. Aqui estão os trechos relevantes:
/*
** The maximum value of a ?nnn wildcard that the parser will accept.
*/
#ifndef SQLITE_MAX_VARIABLE_NUMBER
# define SQLITE_MAX_VARIABLE_NUMBER 999
#endif
/*
** The datatype ynVar is a signed integer, either 16-bit or 32-bit.
** Usually it is 16-bits. But if SQLITE_MAX_VARIABLE_NUMBER is greater
** than 32767 we have to make it 32-bit. 16-bit is preferred because
** it uses less memory in the Expr object, which is a big memory user
** in systems with lots of prepared statements. And few applications
** need more than about 10 or 20 variables. But some extreme users want
** to have prepared statements with over 32767 variables, and for them
** the option is available (at compile-time).
*/
#if SQLITE_MAX_VARIABLE_NUMBER<=32767
typedef i16 ynVar;
#else
typedef int ynVar;
#endif
