The default limit was implemented to maintain performance while working with the Divide command in ArcGIS 9, which became Split and Construct Points in ArcGIS 10. In some cases, particularly when dividing by distance, you could inadvertently create and flash very large numbers of features.
To increase the limit, try creating this registry key. Start the Windows Registry Editor, navigate to HKEY_CURRENT_USER > Software > ESRI > Desktop10.0 > ArcMap > Garcia, right-click, and click New > DWORD (32-bit) Value. Name it MaxDivisionPoints. Right-click the key, click Modify, and enter 2000 (or the maximum you want) for the Value data. Flashing on Split will only occur if fewer than 100 features are created. This works in ArcGIS 10 SP3 and newer service packs.