Just to be clear, there are two separate issues here.
First is the limitation of the official server software in the number of tunes it can index. I don't know what this limitation is exactly, but it's not really prepared for the large collections some users would like to access from their Rio. (This is what I thought you were talking about, and it's a limitation from which jrec doesn't suffer in any practical sense other than disk space.)
The second is the Rio's ability to handle large playlists. (This is what you were talking about apparently.) It fails in my tests with lists of >2K tunes where the behavior varies based upon the fragmentation of memory. JRec offers a partial solution to prevent the potential error -- it truncates the list at a size that is configurable through the web interface. Of course you can't then get a playlist of ALL your tunes, but thems are the breaks. It's a hardware limitation. The Rio doesn't do paging over large lists. The best workaround is to create playlists, with jrec or otherwise.
Sorry for the confusion!