Well, I'm not sure what limits there are in your choices - you don't say how many categories you have. On one shop I maintain (
http://www.insiderchic.net/shop/) the owner has a total of 30 Featured Products selected from assorted categories. I'm sure she could have more, but there's a limit to how far people want to scroll down.
To be clear, there are two completely different types of Featured Products. One on the home page (at least in the Fashion_Mosaic_Grey template), where you can mix & match from multiple categories. The other type is on a Category page where - not surprisingly - you're restricted to products from the relevant category.
Maybe you're mixing up the two types available?
John