Not necessarily. The limitation is legal/regulatory as opposed to technological.
German traffic law is the strictest in the world for both automobile and bicycle lighting systems. For bicycles, at least, the regs are known as StVZO/TA. All the dynamo manufacturers I can think of make their dynamos (either hub or bottle) compliant with StVZO/TA. Many of the better dynamo-powered lights do as well.
Most of the regulations apply for speeds between 10 and 15 km/h (6-9 mph). (This is one of my beefs with StVZO/TA.) As you go faster, the hub creates more juice. This extra power is regulated away. Over 20 mph, I can feel it as a buzz or vibration in my bars. In other words, the power is there, it's just that commercial lighting products are not allowed to use it if they want to be compliant with StVZO/TA, so they dump it back to ground.
See
Bicycle lighting in StVZO/TA. Scroll down a bit to the section titled, "Elaborations on the requirements: what they mean, how they limit what manufacturers can make, and more"
This page,
Dynamo-Powered LED Light Circuits for Bicycles, has circuit diagrams and parts lists you can use to home-brew lights in excess of those commercially available. It's something I can't do, so I'm stuck with the commercial stuff.
Yes, I understand all of that (I'm an electrical engineer).
A dynamo is not an infinite source of power. Presuming it was designed for these markets, it was designed ultimately with the 3W limit in mind. That, plus some engineering margin - say 10-40% or so, is likely what it was designed to provide not a 300% increase. And these circuits have no information on the dynamo itself and it's specs. Could work and it might be reliable, just saying it's worth some caution. Reliability is where it most likely would fall down. Right now, it's a known unknown. That's all I'm saying.
Then again, I'm not sure why anyone would feel the need to go to all this effort when there are a lot of lighting choices around that solve this problem without the need for modification. There is the hobbyist motivation, I suppose.
On the issue of government regulation - it seems to me the Netherlands have the right idea (essentially stay out of it) compared to the Germans. Bike lights are not a problem. We may approach that in the future as the technology improves, but almost with exception it's not a problem.
J.