My how they grow fast, don't they? Originally, Microsoft said that Xbox Live Arcade titles should be 50MB or less. Today they've bulged well past the 1GB barrier. Microsoft has confirmed that two gigs is the new max.
At Tokyo Game Show, IGN brought up the ballooning size of XBLA games in an interview with Microsoft's director of digital games, Scott Austin. Austin acknowledged 2GB is the new maximum, but not through any edict from Microsoft; it's because of a technical limitation of the system serving those games.