It's not hardcoded, the number of root directory entries is read from the boot sector. Should work with any valid number. The default value for FAT16 volumes is 512 and most common formatting utilities do not allow to change it.
But linux format tools specifically allow this, so why not give it a try?
Since most users are indeed limited by the actual number of the directory entries it would seem wise to try it. Say with 2GB SD mkfs.vfat ... -r 2400 ... this should allow use of the whole disk capacity for ADFs.