My sitemap claims they have indexed over 3 thousand pages from it but when i do a site command in Google
site:http://domain.com
It returns 200 pages. I have heard of the sitemap index count reporting less pages than what Google is showing but not more, why is that and will the results update?
Since a few days ago only a few pages were reported indexed from Google Webmasters and the last few days there has been over a thousand a day getting indexed according to the index count
As long as I can remember, Google has always capped the number of results that are given on any on search, so if you was to search for a "keyword" then the limit would be 1,000 this rule also applies to site: query.
However Google site: does report the total number of pages found within the search at the top of the search.... But.... This number a lot of the time is incorrect and shouldn't be trusted, its often bugged and you can test by looking at the number at the top and then clicking another page such as 10 and compare the results (a lot of the times the number changes dramatically.)
Google Webmaster Tools
You should use Google Webmaster Tools to work out the indexes, site: command is generally good for checking if a page has been indexed i.e site:yourdomain.com/url-of-page/ but its not designed for checking all the pages at once.
Google Site: Currently Bugged
Google has just recently released Penguin v2, this had a cluster filter update applied which prevents to many results from the same sites being displayed in search for results, for example you search for keyword cats and one site has 5 results on the front page or the results.. This is called clustering, anyhow! this update has caused many problems and currently the site: command is bugged and only returning a maximum of 3 pages (30 Results) for the majority of sites. This should be temporary and result when Google get around to fixing it.
In addition to Bybe's great answer, you can some times dig out and get Google to show these pages that you think should be there by excluding certain url strings.
e.g
If you had 1000 URLs that had the word 'product' in the url, and these are the only urls showing up on a 'site:' search, you might be able to get the others to display by doing a search such as:
site:example.com -inurl:product
Putting the minus sigh before the url will exclude all urls that contain 'product' being returned.
You can also include words that must be returned. So if you had urls with the word 'catergory' in, but they aren't showing up you might get them to show up doing a seach such as:
site:example.com inurl:catergory
The 'inurl' tells Google to only return urls that contain 'catergory'
You can read more about these search operators on this great post on SEO MOZ
