Ah, that would seem to explain it! Indeed, `term-buffer-maximum-size` defaults to 2048.
So this bug report is based on a misunderstanding, and you can close it, sorry!
In investigating, I noticed that the following text in term.el appears to be out of date:
;; Brief Command Documentation:
… for example:
;; M-s comint-next-matching-input Next input that matches ← This is not true! It is bound to term-next-matching-input.
Is there any point retaining this documentation at the top of the file where it doesn't appear in the manual or any docstring?