Suri,
The fewer the better. I find that the US state lists - 50-> 60 (more thasn 50 because of some non-real state options) to be just about my limit as a user.
I feel the less the better. More items take longer to populate the list box which, if running from a query over a LAN or WAN could really slow down execution time. Also, from the MSDN on AddListItem():
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