"Is there a maximum size for individual records?"
A few MB. I can't be more specific than that, because I haven't seen all the files in the world...but generally, the largest scaffolds I've seen are a coupe MB.

"When processing the records byte by byte, how do you intend treating the inter-record newlines?"
Reasonable question. I just skip them. This is handled in a function call to "get_next_char", which really gets the next char about which I care. Also, see a ">", skip until the newline.