I dont think there is a limitation from TS ( we have tested with long sequences containing more than thousand steps).
The only issue maybe with the memory limitations of your machine.
The size is only limited by available memory. That said, saving a file in the XML format takes more memory than in the binary format (binary is the default). So if you want to have a big a file as possible, use the binary format. Also, since TestStand is a 32-bit application, it's generally limited to 2GB of memory, though you will likely get file saving errors before all 2GB is used up due to memory fragmentation (i.e. the inability to allocate a contiguous block of memory large enough, even though enough memory exists).
Hope this helps explain things,