There is no artificial limit on the colours that can be selected during the world generation.
Each world config uses a customised recipe for generating colours. This recipe contains many RNG inputs as the colours are evolved and selected. Some blocks have a high degree of variability, for example gleam, which is allowed to select any initial hue. Other block colours are evolved with normal or linear RNG ranges from parent block colours. Some relationships vary hue, luminance, and saturation independently. Some of the configs limit the hue range to try and make more thematically consistent worlds: umbris red-orange, rift blue-pink, blink green-yellow. Likewise Lush worlds attempt to create earthlike palettes where vegation is pulled to green, wood brown, rock grey, and liquids blue. This means that these worlds will have more consistent colour selections.
When I first setup the worldcolour configurations I generated over 500 worlds and confirmed that the recipes (across all the configurations) spat out over 200 colours each. Clearly, as described above because of the theming, some colours are selected more often. But I was happy, when looking at all the recipes together, that the system was generating lots of variation.