More than 127 Arduino working together

Sure - use RS485, and assign addresses to each device, make the address 16 bits, and come up with your own protocol instead.
Here's a couple of application notes to get you started.

AN723 RS485 fail safe terminations.pdf (155 KB)

AN763 RS485 termination.pdf (234 KB)

AN-960 Analog Devices RS485.pdf (246 KB)