It's limited to prevent DoS attacks on P2Pool by e.g. making a bunch of fake transactions and then forcing them to be relayed across the entire P2Pool network. With this limit, an attacker can only force every other P2Pool node to download, at most, 50kB per share the attacker mines.

Given that 100kB transactions are possible, it should probably be 100kB, not 50kB, but it doesn't have much of an effect otherwise, since 50kB/share is comparable to the maximum transaction throughput allowed by Bitcoin (500kB/block).

K1773R, your "hackish fix" will result in your shares being orphaned if it ever results in differing behavior. The contents of the generate_transaction function are used to determine consensus, so if your version acts different, other nodes will see your shares as invalid.