The block size of your VMFS datastore is the limiting factor, from the below it would suggest that your VMFS-3 datastore has been configured with 1MB block size where the maximum virtual machine hard disk and file size would be 256GB.
See the below for the limitations provided by both VMFS-2 and VMFS-3 block sizes.
Block Size | Largest virtual disk on VMFS-2 | Largest virtual disk on VMFS-3 |
1 MB | 456 GB | 256 GB* |
2 MB | 912 GB | 512 GB* |
4 MB | 1.78 TB | 1 TB* |
8 MB | 2 TB | 2 TB minus 512 B* |