How long should my System password be?
I tested passwords up to 480 characters (in OS X version 10.8.5) and it used all of them; around 480 the passwd command had a little trouble setting passwords, but it was slightly inconsistent, so I'm not sure if that's a real limit. I didn't test with the System Prefs interface, because it doesn't allow pasting passwords, and there's no way I'm typing something that long (twice!). Basically, it'll use as much as you can stand to type.