Hi wish I could get a clear answer on this as well. I have a 4TB SD drive and 64 GB Ram - and my computer locks up when I try to stitch more then about 500 RAW or .jpg files. I am going to trying stitching 300 at a time and see if I can stitch them. MS ICE seems to stitch, but won't always allow me to save the file. Other software also locks up - I am using a fast processor with lots of RAM and free hard drive space so far no luck. Best I can stitch so far is about 479 images using CS versions of photoshop. I tried Gigpan (now bankrupt - but it needs to know the number of rows and cols - which I don't know off hand. Also tried other programs without luck - but have read a few others have been successful.
I must say this sounds a bit unrealistic. If this is going to have a remote chance of success, you need to turn any geometric correction off. It has to be reposition only. Otherwise it will end up like a giant four pointed star with all the corner stretching.
But that in itself makes aligning and blending the frames more difficult, and means you have to be extremely careful to avoid parallax error. Stitching always starts with careful shooting. I have used a Gigapan, and it relies on an elaborate programmable contraption that rotates and shifts the camera on three axes to keep the optical center of the lens in exactly the same position at all times. Trying to use Gigapan with software only will usually fail.
What's the pixel size of the originals? If successful, what pixel size do you anticipate for the final result? You'll probably need several terabytes for the scratch disk. RAM is basically irrelevant here, this will all be scratch disk.
Other than that, my general advice is always to not use the fully automated Photomerge script. Break it up into its basic components, auto-align and auto-blend. Always put a frame at the center of the scene at the bottom of the layer stack. The bottom layer is the anchor that the others will align to.