XML standard will permit up to 50,000 pages.
Google-XML-Sitemaps is a very useful WP plugin.

But if your reach few thousand items, it may display incomplete map on your WP website.

You have to configure it correctly, here are the settings, click to enlarge

I set xml-sitemap memory limit to 32M and my VPS server core memory_limit is set to 64M.

Here are more tips from the most famous Google engineer, Matt Cutts, talking about importance of sitemaps for indexing and ranking.
Dagon Sitemap Generator is a good addition to XML maps in WP.