Is there a cap to how many hitpoints a character can develop in MERP, or can a character keep putting development points into body development out to eternity?
Yes, you can keep getting more hit points as long as you keep levelling.
(MERP uses "hit points")
You've found a quirk of MERP from the conversion from Rolemaster that the designers didn't carry over "Racial maximum hit point" as a concept from Rolemaster.
In Rolemaster (1, 2, classic) a characters maximum hit points is determined by their race and their CON bonus; so a goblin might have a racial maximum of 80 hit points and a troll 200. The CON bonus gives a % extra on top of this, so a troll with 30 CON bonus would have 30% more than normal for their race. The race also determines which dice they roll for hit points for each rank of body development, whereas it's always a d10 in MERP.
However, in practice in MERP the number of hit points is self-limiting as the maximum number of body development ranks a character can have is limited by MERPs level cap of 10, and after that the system suggests using Rolemaster instead which has racial hit point caps.