I don't understand the actual science well enough myself to explain, but my understanding is that there are lots of limits to do with optics, the behaviour of light over such distances, the wavelike nature of light, etc.

See https://en.wikipedia.org/wiki/Diffraction-limited_system for example.

The Planck constant presumably, if we can get that far.

https://en.wikipedia.org/wiki/Planck_constant#Significance_o...

Practically, yes, telescopes are limited by the diffraction limit. This depends on ratio of the wavelength of the light being captured to the size of the optics. In theory one could make larger and larger perfect lenses/mirrors, but practically there is a limit somewhere. More information at https://en.wikipedia.org/wiki/Angular_resolution

I suppose at some point quantum effects will take over, but I'm guessing the manufacturing requirements for perfect optics will be the limited factor long before then.