The maximum limit of picklist is 65,000 as explained in the on-line help. However, you may not see all the values in your picklist even if they are less than 65,000.
You need to change the setting for SORTMEM entry in [Services} section cer3.ini file in case you dont get all the values in the picklist.
Cognos Knowledgebase gives following recommendation :
The default SORTMEM setting is 512. This should not be set higher than one quarter of the available RAM on the system.
For 256mb of RAM the SORTMEM should not exceed 65536.
(256 * 1024 = 262144 / 4 = 65536)
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