The 16 x 16 tiles limit is bind to the way TileMap are compressed and saved.
But it is possible to use the sprite function with a tile index greater than 255. This meaning you can use tilesheet that have more than 16 tile in height.
But in general, I would recommend to create another tilesheet if more than 256 tiles are needed. The tilesheet of a tileMap can be changed by dragging the image from the assets panel, to the tilesheet panel.
Tilesheets can also be switched at execution time with:
map.setTilesheet(tilesheet);