Are there some limit on files logged through syslog?
Best answer to this is: The limit is a Linux "problem" and not a syslog problem. See the right answer here: http://linuxmafia.com/faq/VALinux-kb/2gb-filesize-limit.html
And an extra good advise: Update your Ubuntu. It's way too old. And for a production server it is a very high security risk. Upgrade at least to Ubuntu 10.4.
Are you running on 32 bits? If so, take a look at 2GB file size limit.