When engineering these head units, they use the dumbest and cheapest file handling engines available.
Most only use an 8 bit address space for the files, thus 255 limit.
There is generally never a fix for this because it usually is a hardware implementation of the cheapest level.
Instead, they trust that their market mostly owns IPODs which take over the job of indexing, controlling, and playing datastreams.
Its alot easier as a manufacturer to just have their hardware "play stream from X source" indefinitely using Apple's publsihed API than it is to implement a playback control scheme from scratch, a stream manager, file handler/parser etc etc etc.
The earliest manufacturer i know that didn't have this problem is Kenwood. And since JVC now have Kenwood guts, they too don't have this problem. (both known from personal xperience.)