The good news is, if you rockbox it, the 128gb limit no longer applies. Rockbox can use the entire space.
The bad news is that because rockbox's ata driver, currently, doesn't play nicely with flash adapters, if you use rockbox to get around the 128gb limit, you then have no reliable way to sync your music - as that only works well if you boot in the original firmware, but the original firmware still won't be able to see the entire disk space.
I am not a dev, just a rockbox user, but as far as I know that is the situation currently - unless or until someone manages to patch rockbox so you can sync reliably in rockbox mode. I gather that is being worked on? I don't know if any recent development versions have made progress on that issue?