How many sms can be stored maximum in a phone.

Some phones especially Nokia and the newer smartphone models have the capacity to store as many messages as you need, because they use the whole internal memory of the phone to store texts, as opposed to a small percentage of the memory, which is what is seen on older phones. But I used to have an N97, and I thought because it had so much internal memory, I could store as many texts as I wanted and the phone would still perform fine. But once I crossed 2000-2500 messages, the phone started hanging and performing at around 30% of its actual speed. Everything went back to normal when I emptied my inbox/sent items. After that I kept the number of messages I stored to around 500. It didn't give me any trouble after that.

Your phone uses memory much like a computer, but instead of partitioning your memory, your cell phone doesn't differentiate between a picture, a text message, a song, or memory it needs to perform. So, as you suggested, your phone can slow down with a lot of messages or files stored on it - it's better to get some software to back up those text messages or make sure that pictures, videos, and music are stored on a memory card.