In response to inquires made by our sister-site Joystiq, Microsoft stated: "We have set file limits as a general guideline. An important part of Xbox LIVE Arcade is easy access and keeping file size down is a vital part of that. Equally important is offering titles with superior game play. We weigh both considerations on a case-by-case basis, and will make exceptions when it makes sense to ensure the best customer experience." In May, Microsoft increased the XBLA file size limit to 350MB.
So, the XBLA still has a hard file size limit ... except when there isn't. Wait, what?