That's a mis-framing of the situation.
The issue isn't so much as the client is failing - but that it wasn't designed to handle their edge-case - and trying to sync 700,000+ items, or 700GB worth of files to your desktop is definitely at the edges.
Other desktop sync clients (e.g. Box.net or Dropbox) exhibit similar performance characteristics - e.g. Dropbox advertise a limit of around 300,000 files (https://www.dropbox.com/help/space/file-storage-limit). So this isn't something specific to us.
For us, I know there isn't a hard limit per se, but there are memory limitations, due to this being a 32-bit binary. So things like the user's environment, and the length of certain fields could also play a factor.
However, it is something that I know several smart people are chipping away at steadily - in fact, there's a new "Backup and Sync client" we announced a month or so ago, which is launching any day now. It's basically Drive Sync Client 2.0.