1TB might be a struggle :) Yes, this is currently limit by both browser storage (IndexedDB) and memory. The reason it is also memory bound is because Emscripten's IndexedDB VFS is actually implemented as an in-memory VFS which syncs files to IndexedDB every once in awhile (due to an async limitation).

PGlite is working on an OPFS backend, which will likely increase the max data size quite a bit.