Okay, that explains a lot. I guess the limit is in place for ratelimiting purposes, so that a huge block couldn't overload the network (miners and clients) with lots of data? Or so that the block is uploaded and propagated faster, and they have a bigger chance of getting the block reward?
Those are two of the more important reasons that there is a lot of support for a fixed size block. In addition it creates an incentive for users to include transaction fees in their transactions so the network can transition to being supported by fees rather than the inflationary costs of creating new bitcoins.
