What is the maximum size region file that CIAO can process?

There are no design limits, but there are some some practical limits. Greater than 32767 individual shapes gets into a grey area (but is still useful); increasing to more than 65535 shapes may cause more problems.

There are various string-length limits on the command line an in ASCII region files. There's no hard and fast rule, but this general statement holds: if you think the problem is due to an exceptionally long line or string length, it probably is. This is usually seen with many, many sided polygons, which are best input as FITS regions. FITS regions don't have this kind of limit, because the FITS representation stores the array of vertices as a binary array of data in table columns. The file is more structured, and knows how big it is and where each piece of data is. The text string, in contrast, requires a buffer large enough to fit it.

The tool dmmakereg will convert an ASCII region into a FITS file. If the region is very large and cannot be processed by dmmakereg, try loading it into ds9 and then saving as FITS.