There is no general altitude limit in the U.S., but you must not present a risk of collision with manned aircraft. Certain areas have additional restrictions (e.g. near airports, large sporting events or in the vicinity of Washington, DC).
The "400 ft" limit for model aircraft is purely advisory and is not part of any binding FAA rule.
Balloons can actually go much higher (not sure on the rules with balloons) but UAV's are limited to 400ft AGL and not within 5miles of an airport by the FAA.
I was wondering about that as well. According to the manufacturer, the DJI Phantom[1] (a common consumer drone) has a max vertical speed of 6 m/s. So in 10 minutes (battery lasts about 20, 10 up, 10 down), you could reach 3600m. Higher than these pics were taken!
(you remote probably won't reach that...)
About the thinner air... I regularly fly a hexacopter at 7500' (MSL here in the mountains).
With all other things being equal, the thinner air means you have to run the motors at much higher speeds to appreciate the same lift, and the resulting loss in battery life is pretty significant. The same configuration that gets a 30 minute flight a 1000' MSL will only do about 12 minutes at 7500'.
Model gliders soaring in thermals can exceed 2,000 ft. Since the energy is supplied by the rising air, altitude is limited only by the pilot's ability to perceive the aircraft's orientation at that distance!
