As well as balancing, the limit represents how many you could really make at a time IC. Jewelry, bows, weapons, you can really only make these 1 at a time regardless of how good you are.
Holy water however, you just bless the water and put it in a flask. I don't see any IC reason you cant bless more water, then put it in flasks, or fill 5 flasks and bless them all at once (requiring more divine power represented by the # of spells expended.)
Holy water should be limited at 5 to be consistant with similar items IMO (All potions in alchemy can be made 5 at a time.)