I've used WIX's heat.exe and got 2100 components and got a warning that Windows Installer is constrained to have maximum of 1600 components per feature. I understand that I might stick many files into one component and thus reduce the number of components, but is there another way of using heat.exe that won't produce lots of components?
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This is a Windows Installer limitation (see Remarks area). The ICE47 description contains more info and a proposition to work this around. As you can see, the warning says:
This could cause problems on Win9X systems.
Based on my own experience, if you target higher OS versions, you can safely ignore this error. A kind of proof to this statement.

Yan Sklyarenko
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1It should be noted there are serious performance penalties with MSI when you start having thousands of components. Depending on the nature of the files and the servicing strategy being used ( Patches, Minor Upgrades, Major Upgrades ) one may want to group files into related components. – Christopher Painter Mar 22 '11 at 14:45