While I'm not disputing the limit numbers or whatever hardship they might cause, it's worth noting that this is a basic limitation of the original Lambda model and maybe FaaS in general. The capability comes from running a giant pseudo-infinite mesh of isolated execution environments that load your code and execute on demand, while having to buffer both the request and response to make sure clients are protected from the details. This buffering means that size of the buffer will always be limited - the team managing might make the buffers bigger based on experience, but it's not a solved problem.
ALB to containers or servers is a different beast - here the entire request and response need not be buffered at all (there might still be a very small buffer, mostly negligible), so streaming responses, websockets etc become possible.
We use lambda to resize images, so we do push against these limits a bit, but it's a fair tradeoff for the advantages - no worries about CPU throttling from too many requests, no waiting for servers to start for spiky loads etc.