I was once told that the 700R4 has a rev limiter in the O/D gear. Is this true?

No, not a rev limiter(per say) but if you get above 85ish mph it will down shift into 3rd. B&M sells a little valve that doesent let it downshift until 3/4 throttle $40 I just cant think of the part number right now.
SSC

Second Opinion - I agree. There are several comments about getting later 700R4 trannies, but if you can afford to upgrade, do it. The Tremec or BW T-5 is well worth it. The T-56 is more of a status symbol than an upgrade. You got to invest a lot of work and money for it, and most people cannot justify it.