DLC has slowly been upgraded from 50MB, before being boosted to 150MB and then moving on to 350MB. Microsoft will make exceptions if "there's a quality reason" to do so.
"Our technical constraint is 2GB," said Austin, Microsoft's director of digital distribution. Games that have gone over the limit thus far have been Portal: Still Alive (629MB), Super Street Fighter II Turbo HD Remix (368MB) and Watchmen: The End is Nigh (1GB).
"If there's a quality reason to go over 350MB," he said, then they will. Fair enough Mr Austin.
Source: Shacknews