i am beginning to think there is another setting somewhere (the shell or in login?) that allows a limitation on processes. i just cant find it.
Have you checked CHILD_MAX or whatever it's called? I think there's a limit on the number of child processes that a single process can spawn. It might even be hardcoded (in a #define) in one of the kernel headers. If threads are still implemented as processes on Linux, then you'd be hitting that limit, too.
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