There are practical limitations from engineering and economic perspectives. From the engineering standpoint, architectures tend to run into scale problems as you make things bigger.[0] For example, if you take an existing rocket design and decide to make the same thing except 25% taller, while keeping the other proportions the same, you'd actually increase the mass of your rocket by a factor of 2 (width and depth also increase by 25% -> 1.25^3 = ~2). From the article I linked to, breaking strength varies with cross-sectional area rather than mass, so the rocket's breaking strength would only have increased by a factor of 1.56. So your rocket design might no longer be sturdy enough, and it might warp or break or explode when you try to launch it. (Breaking strength isn't the only factor to consider, either; there are tons of factors in materials science that would affect the many components of a rocket.)

The implication is that you'll probably want to design an entirely new rocket if you want to make one that's significantly bigger than what you've made in the past, because rocket designs aren't going to be fully reusable at significantly different scales.

That's where the economic perspective comes in: rockets are expensive, and the bigger they are, the more expensive they'll be, from a raw materials perspective at a bare minimum. The hundred person rocket that Musk has proposed would already be significantly larger than any actually constructed rocket to date, so it has to be a new design, which means they're going to have to build and test prototypes. And some of the prototypes will probably blow up during testing -- hopefully not many, or they'll run out of money and won't be able to keep going.

Now if you want to build a rocket that can hold a million people, you'd probably be talking about the largest man-made structure ever. The only structure on this scale that I'm aware of (which was never built) is the X-Seed 4000, which would have housed 500,000 to 1,000,000.[1] Its proposed height was 4000 meters, which is about 33 times taller than the proposed SpaceX interplanetary rocket. If you scaled up the SpaceX rocket design to that height, the mass would increase 36000x, and the breaking strength would only increase 1000x. I think we would probably need some major advances in materials science to be able to make a rocket that big that didn't just disintegrate on launch.

Secondly, what about the economics of a million person rocket? The X-Seed 4000 would have cost roughly a trillion dollars (in 2016 USD) to construct, and it just has to sit on the ground. I'm going to assume that at the barest, most insane minimum, it would cost at least 10x as much to build a rocket that size. So that's 1/7 to 1/10 of global GDP (in 2014)[2] -- for one rocket -- that will probably disintegrate.

But! Let's assume that we make major materials science advances and can actually make it work, and we make it reusable up to 10 launches, and somehow we get the whole planet to agree to build this thing. The price tag actually isn't so great... $10 trillion / 10 million people = a million dollar price tag per ticket. So maybe my estimate is too high and we could build a rocket that big for a trillion, no more than building a building that big. Even then you're still looking at $100k per ticket.

So, in short... My guess is that there might be some technological and economic sweet spots that are a bit bigger than than the SpaceX design, but I think it's a good starting place in terms of feasibility. And yes, in practice there are some limits to how big you'll make your rocket.

PS. I don't think "breaking strength" is likely the most relevant factor for rockets (I an not a rocket scientist), but it's the principle of the scaling thing that matters. Plus a rocket has to have supporting structures to help it keep its shape, so breaking strength might be relevant after all.

[0]https://www.av8n.com/physics/scaling.htm#sec-strength
(I linked to the section on how breaking strength varies with scale because it seemed the most relevant to rocketry, but the whole page is useful for explaining many of the ways in which things vary nonlinearly with scale).

[1] https://en.m.wikipedia.org/wiki/X-Seed_4000

[2] https://en.m.wikipedia.org/wiki/World_economy