1 1/4" is about the tallest you can go with the stock 8 tooth driver's. Any taller, then you'll need 7 tooth's like M5 mentioned.
I ran a 1 1/4" 136" Summit track on my 91 back in the day. I was surprised were that sled could go for only 56 horsepower!
I believe that you can still get rail/tunnel extensions from Tom Hartman for those older Phazer's as well.
I have five of these for my kids to ride. On the first two we had 1.25 tracks and still struggled. I noticed that usually as the sleds slowed they had a tendency to push the back around and try to pass the front. I put on a set of older plastic cat skis and away they went. Too much resistance from the old steel was our biggest traction issue. Now everybody tracks straighter and spins out less, the 1.25 obviously has an advantage over the conveyor belts, but skis helped us more than tracks.