The file size limit is determined by the file system. For example, FAT32 cannot process files larger than 4 GB. Unfortunately, it is likely that your microSD card is formatted in FAT32.
For Android 2.2 and older, the internal file system is YAFFS. The author, Charles Manning, states in this newsletter that the maximum file size is 512 MB. It has been announced that Android 2.3 will use ext4 .
It might be possible to format the SD card into this format, but I have not tried. Keep in mind that you will not be able to read content under Windows or OS X.
See also the answers in this section.
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