Yeah, this is a known problem, and there's still no fix. The only thing you can do is try to correct the names and descriptions. If the same thing happens afterwards, try to do it step by step, by saving your kernel2 file after each correction and by making a backup. Thanks to this method, I noticed that it was when I tried to correct a certain name (cait sith's Game Over limit), that some characters would again disappear. So, in the end, I could correct all the names except this one, and it works fine.
From what you're saying you're modifiying the PC version of the game, so it's perfectly normal that the "Update text" function is grayed out. "Update Text" is only relevant if you modify a PSX kernel, since the PSX version doesn't have a Kernel2.bin. As long as you create both Kernel.bin & Kernel2.bin when saving (or only Kernel2.bin), your changes should be saved. If they're not, try my above method because it means that changing a certain name triggers the same bug again.
As far as I know, this problem isn't caused by the file size.