The current "limit" stands at 350MB, but several Arcade games already exceed that boundary, including Portal: Still Alive (629MB), Super Street Fighter II Turbo HD Remix (368MB) and Watchmen: The End is Nigh (1GB). nope "Our technical constraint is 2GB," said Microsoft director of digital distribution Scott Austin. "If there's a quality reason to go over 350MB, [then we will]."
The original limit was set at 50MB at the console's launch, and then increased from 150MB to 350MB last year.
Chair's upcoming action-platformer Shadow Complex, announced last week at E3, is expected to weigh in around 800-900MB, according to studio creative director Donald Mustard.

probably because their download system stores the entire file into memory until it's actually saved to the harddrive or ...
standard signed 32-bit integer in some key file management/server connection variable. Who knows what ramifications this...
How does it work? Don't know! But here is my ISP's page on it: http://www.mywestnet.com.au/freezone/xbox/