Is there a max size limit on the value of a JAVA_OPTS "-D" flag in Java?

Yes and no. It's complicated. But mostly good news.

java does not care; the args are passed in as a string, though (and not as a stream from disk), which means there is a limit based on your memory. But, 1 GB's worth of text is... a lot of -D options. A few orders of magnitude more than you currently have.
The shell and the OS, however, certainly do. Windows, for example, cannot run commands that exceed 8191 characters in length. You're currently on ~1200 characters, so you can make your -D stuff about 7x longer than what you have right now, but then you're done, at least on windows. On posix it's dependent on OS and shell, but there are usually also limits. getconf ARG_MAX usually tells you what it is. On my desktop system it's currently 1048576, on a random linux shell i have access to, it's 2097152. That's a ton of room to grow for you.
You can avoid all problems by using the @ system. You can write java @foo.txt, which will cause the java executable to open foo.txt and use the contents of this file as arguments. So, put your giant -D switch in a file, and then use @allThatJazz.txt instead of -Dreallylongcommandlineoption. Now you can stop caring about OS imposed args limits.
Given that -D switches are available via System.getProperty, your limit is now heap related. We're talking hundreds of megabytes before it becomes unwieldy - 200,000,000 characters maybe.