they had to put a cap somewhere, 999 and 9999 sounds good to me.
besides, if you raise the number for cloud and party, you have to raise it for everyone, and the last thing anybody wants is a tonberryking being able to dish out 999,999,999,999,999,999,999 damage with everybody's grudge because we spent a few hours lving near by O_O
besides, if you don't like lv and damage caps, look for a ps2 game called disgaea

great game, but time consuming >_>