So far I have practiced scales using the caged system. But I am not sure what the proper way is to connect 2 scale positions or to connect 2 different scales together. People say that the caged system limits full use of the fretboard.
Should I stop practicing using this system? If so what other systems are there to help me utilise the whole fretboard?
It depends, have it limited you in the use of the fretboard?

"People say" doesn't mean it is true for everyone. When i was starting out i learned by the caged system, and to this day you could argue i still do cause i always base everything i do around chords, which is what the caged system does. For me as a jazz player it has helped me being better at outlining the changes than if i where to study a more "rock approach" like three notes per string patterns.

I'm generalizing a bit here, what i am basically saying is just cause it works/doesn't work for some people does not mean it will have the same effect with you. Also worth noting is that you can often view on things from multiple angles, as said i used caged as a beginner, nowadays i simply look at the chord/chordextensions and know what intervals around that root i can use for different types of chords and contexts.
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Caged is a great building block to discover the fretboard. Now learn your scales and relative outside chords. Know the diminished scale and when to use it.
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Caged is a great building block to discover the fretboard. Now learn your scales and relative outside chords. Know the diminished scale and when to use it.

This. The caged system is a means to an end, not the end itself. You don't "play the caged system", you play music. You choose what to play based on the sounds to want to hear and caged is just one way of getting to know where to find those sounds on the guitar fretboard.

If that's not happening yet then you may need a different approach, or you may not be using this approach correctly. Always bear in mind WHY you're doing something, the CAGED system doesn't just exist for its own sake. Most aspects of learning and practice feed the same goal, to help you play music on the guitar. If a particular aspect of your practice doesn't seem to be helping with that then you need to properly analyse it and work out if you're missing something or if it was just a piece of duff advice , and there is a lot of that out there.
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I'd recommend moving on from CAGED to the 5 region system (neck regions by octave, rather than chord-focused), and then later consider horizontal playing traversing the regions.

Do you comfortable finding all the octaves of a given pitch on the neck?
I would recommend a number of approaches to learning the fretboard. I never used the "caged" system, but I developed something very similar. I think you should keep it, and add more approaches. To go from one box to the other, memorize which is next to which, and learn I-ii-iii-IV-V-vi-viio. You can also use 3nps.