It may be a more nuanced problem, but from the surface that seems like typical SRB2 behavior.
By which I mean, adding too many characters will generally end up borking the game-- or at least the characters, making them unable to do certain actions, as well as even making them not appear in the CSS (Character Selection Screen), but remain available via multiplayer in some fashion.
As much as I wish I could have races with tons of characters, unfortunately the game just can't handle it after a certain point.
That may be what's happening with you too!