Pastes are buffered, requiring much more memory.

[hackerb9]

Perhaps there should be an option to either have the output flushed after each INCR chunk or even completely unbuffered.

While not a frequent occurrence, there is no reason to limit X selection transfers to the size of RAM on the machine. And, it is certainly bad behaviour to potentially consume all of RAM before writing a single byte.

In the extreme, a user should be able to do:
machine1$ xclip < /dev/sda
machine2$ xclip > harddrive.bkup

and have it work no matter how large the harddrive is compared to the size of RAM.