My 705 will record consecutive day's commutes as a single file, but these are short.
In my experience, a new file is created each time the 'reset' button is held down, or the unit is plugged in to a computer. A new file isn't created if you use the right cable that just provides power to the unit.
There may be a limit to the number of points recorded so hence a second file created.
Nope, there's no limit to individual file size. A new file is created when you hold down reset or plug it in to a computer.
What would concern me is if the memory is full and recording stops, or it writes over earlier data
The early 705s had a 512MB internal memory, the later models have 1GB internal memory. (This is separate to the micro-SD card that is used to hold mapping data.)
My (slow) 400km ride last year produced a file that was 35MB recording a point every second and including HR, cadence and power (heart rate strap, GSC-10 cadence sensor and PowerTap rear hub).
So a 1GB drive should be good for at least 10,000km with those accessories. Without a GSC-10 or a PowerTap you'll probably get 15,000km in 1GB.
You just have to remember to clear out the drive every so often (and make a backup of the data).