The recent changes removed a lot of constraints on the entity limit, and now it is free to be raised up.
Technically speaking, it is not removed, but it can be raised so high that it won't bother you anymore.
On the screenshot, you can see the game working fine with 120022 entities (almost all of them func_static):
These changes are included in the latest dev build, which can be freely obtained via tdm_installer.
In the end, I set the limit to 65536 entities. I hope you won't need more
The main point that I'd like to make here is: optimizations against entity limit should not be used any more!
You don't need to worry that something would occupy an entity slot.
You should never inline entities --- that's a very bad idea!
Of course, many of known optimization techniques have other benefits.
For instance, combining several models into one manually or via SEED reduces rendering overhead and should make the game faster. Just make sure that the merged objects are very close to each other. Good news is that now you are not forced to do so, and can postpone it indefinitely.