That seems to be a glitch. The UESP Wiki's "Oblivion: Containers" article states that containers do not have a weight or item limit.
From the UESP wiki's "Oblivion: Minor Glitches - Items Disappearing from Containers" article:
Items Disappearing from Containers
Sometimes items appear to disappear from containers if you have
already put a lot of items in. This is merely a display bug, however:
if you start removing other items from the container the missing
item(s) will reappear. Also, if you "Take All", the missing items will
still be added to your inventory. Saving the game while in the same
zone as the container then reloading the save will often make all the
missing items reappear; leaving the room, or looking in other
containers after reloading, will break the container again.
This glitch seems to be caused by an error in the recorded number of
items stored in the container. It looks like that number sometimes
becomes less than the actual number of items stored. This causes the
most recently added items to not be listed in the container's
inventory. Often, if you add another item to the container, a previous
missing one will appear, but instead the new item disappears.
Storing items that you will not be using at equal to or less than 100%
health will reduce the likelihood of items disappearing. Armor
repaired to 125% can quickly fill up a container.
Note that if you are using mods which raise your maximum encumbrance,
the same glitch may also happen to your inventory.
So, if you dump a lot of items inside a container, some of them will appear to vanish, and when you "Take all" some of the items that were hidden in the container will become hidden in your inventory as well.