Just a guess, but two things come to my mind. 1) least likely, 512 is typical factor of binary. 2) most likely imo, the game would run like a snail with no limit. If you go for a boost you would get very large very fast like 1024.
With a 361 and having 512 towns, each road cut or city razed or build take a lot of processing. I played an AWE on 362 with 31 civs, a lot of work to conquest that one.
The game will switch to the human in a big way, once the limit is reached. The AI will soon decide to not make settlers as it can never found a town, if you are on your toes.
This makes it impossible for it to found a town later. Always check to see if you can found a town after the IBT, Now and then the AI will raze a town and not found a new and you can sneak in a city.
Do not return the favor, always found a town after you raze one. Do ti even in crap place, you can abandon it later to plan one in a better location.
If you start on a smallish island in a 362, start a new game. It will take forever to get any where on map that size. You may even consider bumping ship movements to handle the increase in tiles.