They could have it in various ways:
-Like the banshee in Halo, if you go to high, you merely stop being able to move vertically up, you can pish up, you just won't move anywhere.
-Flying sligs may only be underground/indoor
-Fly too high equals death through less atmosphere
-Low smog makes flying high dangerous: i.e, explosion of rotor wings
-Flying too high severs the possession connection, cuasing the explosion of the slig and Abe getting his mind back. Can also account for horizontal distance, so they won't be able to roam the world.
Flying sligs would be great in an enourmous 3D world, the maneuverbility options are marvellous, as are the gameplay options. It adds a whole new aspect to moving in the 3D world.
If you can use flying units effectively on such games as Halo, then they can definately do it on Oddworld. I'd prefer it not to be surrouded with impossibly high cliffs or fences though