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I see that I have failed to change the description of the option to mention the 255 chars limit :). That is the limit of the database field that is being used. I can change it to a TEXT field in a future version to overcome this limit (it will then be 65,535 chars), although I do think that the shoutbox was never intended for long conversations. For those cases I would recommend the comments option of WordPress or a forum plugin. For most cases 255 chars ought to be enough.
If you already want to start using the higher limit, then execute the following query in your database (change the table prefix if your tables don’t use the standard prefix):
ALTER TABLE pool_wp_shoutbox CHANGE shout_text shout_text TEXT CHARACTER SET utf8mb4 COLLATE utf8mb4_general_ci NOT NULL;