There's actually a good reason for the 499 limit (500 since the set itself is counted).

It was brought in a while back because having bigger sets causes a multitude of problems that resulted in many sleepless nights... Literally, you have no idea how many times I wound up doing all nighters due to sets with 500+ items inside them.

So yeah, afraid it can't be raised.

*EDIT*

As a (related) side note - the same problem is also why there's a limit to how many things you can transfer at a time.