I had no idea MySQL only allowed for 255... That's crap!
Yes quite. In either case this is a none-issue as of MySQL version 5 - however lots of places are still running on MySQL4 (and even 3). The Text field allows 2,147,483,647 characters in SQL 2005 which may be described as overkill for a person's name?! ;)
Also I'm fairly sure a TEXT field is just a special case of a BLOB - which does come with a performance hit compared to VARCHAR.