Yeah, once you get too big your blast sphere is basically in space and so that part does effectively nothing extra and your total damage per mass of fissile mat

Yeah, once you get too big your blast sphere is basically in space and so that part does effectively nothing extra and your total damage per mass of fissile material drops even faster as you try to keep scaling. And even if that wasn't a problem, really big nukes are harder to launch/deliver and would be a much larger material loss if it was shot down prematurely. Having multiple warheads in place of one super large bomb is just a far more reliable attack plan.