As I get higher and higher in level on my necromage vampire, I realize that I can raise fewer and fewer bodies. I get the "X is too powerful for this spell" even with the Thrall spell.

If I continue to level, will I no longer be able to raise corpses because they will outgrow my spells?

Yes. Max is 48 with Necromage and then only Vampires. Everything else has a level 40 cap.

40 is plenty powerful if you get the right thralls. RLT is below 40 but has full Nordic Carved armor that I smithed up. He carries a fully smithed Daedric sword too (so he can cast spells with his right hand). He handed Illia's butt to her one (he took her down with the daedric warhammer he had at the time but did lose to her when they fought one time with just spells) time when they fought, he lost to Serana though because I think she drained him. RLT beat Isran (sp?) and only lost after 2 more Dawnguard people jumped in to help him.

Watching RLT fight friendlies is pretty entertaining. I can't help but to feel proud when he wins.