Chris,
It is possible to increase the size by changing the syslog config file in /etc/syslog-startup.conf. However, I would recommend installing rsyslog and logging to another device that can handle bigger files. If you do not want to do that then you can change the path in the syslog-startup.conf to lag to a directory on the SD card. One warning, though: We have had some problems logging lots of data to the SD Card. Not sure if it has something to do with FAT format or something else. You will have to test it thoroughly.
Jeff