1. The photo texture vs. hand made texture discussion is not that easy. Personally I prefer hand made textures, because they usually fit games better. Photo rapes often looks bad, because they aren't designed to be textures. A direct photo texture without editing is always bad.
Theese days most professional texture artists use photo sources for their textures. Thoose guys however don't just take in the photo and convert it to texture, they edit it - a lot. A photo usually contains a lot more details than the average texture and are therefore good to use as bases.
2. The official HL1 texture limit is 256*256. This however is not really an engine limit, but rather a gfx card issue. People who still run in software mode and have a 2mb gfx card will most likely not be able to run a map with bigger textures. Almost everybody run HL/CS in OpenGL or Dx and have 16 mb of gfx ram or more. Thoose people will not have any problem with 512^2 textures.
So unless you are Valve, then you should not care about if your textures go above 256^2. Even people with an old 16 mb Riva TNT 1 can handle thoose
