Later on assemblers like Merlin and ORCA/M added the ability to assemble source files as separate objects which were then linked.

Earlier assemblers (and the later ones!) also typically supported a capability to reference another source file from another which lets a large assembly chain itself without needing to have the whole thing in memory at once.

At runtime, you could use overlays to essentially load in program modules in and out of RAM dynamically so you'd be surprised at the (relative) sophistication of some software packages back then!

FWIW, VisiCalc - first spreadsheet computer program for personal computers - was developed in 1979 on the MIT Multics system, which was a Honeywell machine, and Electric Pencil - first word processor for personal computers - was (as far as I can tell) developed in 1976 on the Altair.

A PDP-11/45 or 11/70 would have much more memory, but being a 16 bit machine would still have been unable to handle this file in a conventional editor. Honestly I don't know if there were paging editors available for common environments. Certainly nothing on Unix would have worked.

Per the link, the file was editted and built on a PDP-10 running ITS, which was a 36 bit machine with an 18 bit address space.

Interestingly, almost everything else I've seen from ITS uses the 6 bit upper-case-only encoding. This is pretty clearly ASCII.

ITS text files use 7-bit ASCII. Five characters packed per word. Some things like file names use a 6-bit ASCII subset (the range 32-95).

What have you seen from ITS?

I bought a fantastic Logo implementation for the ZX-Spectrum. That must have fitted into well under 16K. I wish I could remember who produced it.

I watched an interview with a Sinclair Spectrum programmer who used a TRS-80 computer and a custom hardware interface to send code assembled in the TRS-80 directly into the Spectrum's memory to allow for quicker development and use of floppy and hard disks on the TRS-80.

Using a serial bus to remote build/debug an application device is a venerable tradition. I know I still do that with USB and Android/iOS devices connected to a PC.

Not PDP-11. This was cross assembled from a PDP-10 running MIT's Incompatible Timesharing System.