I'm just a student in computer science/game design, but yes, there's a technical limitation. Textures, models, and sounds, especially at FF-quality, are incredibly memory-heavy. If each area uses only a small subset of the total textures, geometry, and sounds in the game, it's possible to unload the others and use significantly less memory.
This is especially important on the PS3, which has only 512MB of RAM as opposed to the 4GB even a mediocre laptop these days carries.
It is also possible that different areas can be split across multiple servers, dynamically - if the Black Shroud in Gyshal is super crowded, but Coerthas isn't (for example), Gyshal-Coerthas could be migrated to another server to distribute the load - or Gyshal-Black Shroud could be given its own server temporarily.
Games like World of Warcraft and Dungeon Siege (sorry for the old example, no others came to mind) sneak by by having the current tileset as well as the tilesets of adjacent areas loaded at the same time, so it's technically possible, but the dynamic server distribution wouldn't be, and the texture quality would have to be degraded significantly to fit on a PS3.
