Would increasing friendship limits break the game?

Yes, slightly. But it might not be broken enough to be an issue, particularly when you get to Level 40 and the XP is no longer important.

I dont think so, with trading and battles, you've always been able to increase friendship with more than the 20 people you're able to open gifts from.

They already made level 40 incredibly easier when they added xp for friendships

It what way would the game break? XP looses all value at level 40 (38 really) so more xp boosts won't effect it. Gifts are a good source of items ya but the amount you can carry is already limited and I have yet to run out of anything since gifts started. There must be a reason gifts you find at stops are limited because they were not when it first went live. I would like the number of gifts you can collect to be equal to the number you open in a day

I'd love it if it was increased. I hit the 20 limit this morning by 9 am... It will calm down, but there are a few new members of my home town raid group and the town where I generally work. I've not got a massive friend list around 85, but most of them are pretty active.