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Re:Minecraft adds Ordnance Survey Great Britain terrain data by Bpat on Monday September 23, 2013 @09:40PM (#6435333)
I'm 99% sure it is no longer limited. Notch and Co. added some code so that it can dynamically increase the height in an area allowing for taller builds.
Re:Minecraft adds Ordnance Survey Great Britain terrain data by javert on Monday September 23, 2013 @10:24PM (#6435505)
"the top face of the highest block that can be placed is at Y-coordinate 256." -http://minecraft.gamepedia.com/Altitude

I'm pretty sure what you're thinking about did happen: the height limit used to be 128 and when Notch added some code, it made for a (relatively) big improvement to 256.

Re:Minecraft adds Ordnance Survey Great Britain terrain data by asdfs on Monday September 23, 2013 @10:49PM (#6435604)
I believe they changed it so that the height limit now depends on a single variable in the code, making it easy to build a copy of Minecraft with a different limit. Minecraft as distributed by Mojang still has a 256-block height limit, however.