You can use 128x128 textures, but then you have to build a whole tileset using this 128x128 tiles.
BUT: As Silnarm said the texture for the whole terrain is assembled before the game starts so you get a really huge texture for the terrain. So better don't do it. Currnetly all the terrain splatting is done "manually" by the CPU and not by the gfx card.
So what does it mean:
lets say we have a map of 128x128 cells and 64x64 texture tiles.
the resulting texture size is:
128*128*64*64 pixels big or an image of 128*64 x 128*64 ( 8192 x 8192 )
with 24 bit colordepth its already
128*128*64*64*8 bits which is already 192MB only for the terrain texture !!!! Or am I wrong?
This is maybe one of the main issues why its slow
( and very big in the memory )