Except for slightly more system memory consumption there are no downsides of having the Undo Steps Limit set to maximum (256).
It would be better to have it set on 256 steps by default because I can imagine that there are a lot of users who did a terrible mistake during editing and they can’t undo it anymore because it’s past 32 steps and they did not increase the value because either they didn’t knew about it or, like me, they are updating Blender frequently so that some settings are overwritten with the default values at each update. The only way then is to use the autosave (provided you are lucky and it got auto-saved BEFORE you made that mistake) or to completly rollback to the last manual save, which a lot of users forget to do often when they are busy at editing so there is some of the progress lost.