There does appear to be a limit on the number of values that can be selected in Drop-down Filters in Panels. Given this limit, you can apply multiple such drop down filters in the panel for the same dimension item but different values. Lets say drop down 1 has 1st 200 dimension values, drop down 2 has next 200 dimension values n so on.
You can select the desired value from one of the drop down filters and keep other drop downs to "No filter".
Additionally, to submit a feature enhancement request post under "Ideas" section as follows:
Experience League > Adobe Analytics > Ideas > Share an Idea (screenshot below)