Actually this subject is quite tricky... there are a few documented limitations, but many different undocumented limitations in different scenarios and Flash Player versions... for instance, check this post and its comments:
http://www.bit-101.com/blog/?p=2067
And if you allow me to quote myself ^^
I’ve had the same problem and I think
that it’s not really a draw()
limitation, but a DisplayObject one…
for instance:
var bmp=new BitmapData(8000,100,false,0);
var bmp2=new BitmapData(8000,10,false,0xFF0000);
bmp.draw(bmp2);
works perfectly… same with other
methods like fillRect and applyFilter.
However, it fails if you try to draw()
any DisplayObject beyond 4079 pixels
in horizontal, or 4082 in vertical
(according to getColorBoundsRect).
Also, there are a few threads with similar questions here in SO:
http://stackoverflow.com/questions/1019360/maximum-size-of-a-sprite-in-as3