I've created 2000 users on a 800Mhz/256MB machine and did some testing. No problem what so ever, but I probably don't want all of them to connect to the SME server at the same time.
In other words, there is no technical limit, but depending on what the users want to do on the system there might be a practical limit (for example limited bandwidth). I know of several schools who have happily installed > 500 users on one machine with at peak times about 40 simultaneous users. Given the right hardware and bandwidth this still works fine.
Michiel