The friends lists only take a few bytes (if that). The pictures stored on the other hand take up a lot more room.
It's the traffic from multiple quiz and widget postings that slow things down. The limits should be on the number of people you can post to from the friends list not the number of them at once.
Look at MySpace for an example. You can only add people to groups there 40 users at a time otherwise people could send out 1000s of requests in one go. It's the same deal with the quiz traffic here too.
It's something that needs further investigation though as the bottlenecks that slow the site are not ever likely to be on the friends lists unless something has gone drastically wrong.
People still use other aspects of the site to play the popularity game though even with the friends list limits... if that's what you are thinking of by it not being a good idea.
Everyone is clamouring after the top positions on the quiz, number of forum posts, most recommended, etc. etc. There's even competition among the "skinners" to see who can produce the most even though it isn't rated.
