Hello,
the limit for categories in the "Edit Metadata" dialogs is defined via the Form control and the "maxSearchResults" parameter. It defaults to 1000 for 4.0.2 Enterprise in picker.inc.ftl, and if no size is provided to the data web script on Repository tier ("size" URL parameter), the technical default is 100.
ALF-4220 also affects categories (and fixed it in 3.4.x), since Tags are categories from a technical point of view.
Regards
Axel