Validated that regular Relationship fields (drop-down select, etc.) are not running into this issue, only the AutoComplete field mappings
The limit is not shown during the creation of the form but when the form is put onto a page. I actually tested it with different scenarios and found out that the limit only applies when I map a GF dropdown field to a POD auto complete field. By mapping a GF dropdown field to a POD dropdown field the problem is gone.
From this WordPress.org Forum Post: https://wordpress.org/support/topic/populating-dropdown-with-pod-items-size-limit/
Validated that regular Relationship fields (drop-down select, etc.) are not running into this issue, only the AutoComplete field mappings