i tried it on a network with 1000 directories, and it locked up my acad.
im sure there is a limit on how many directories can search without causing issues.
would anyone have a good guess as to how many?
Nope, it's a bit like asking: "How long is a string?"
It all depends on how fast your whole setup is. I.e. discs, network connection, PC, OS's filesystem interface (both yours and the server's), congestion on the network, number of files in each folder, number of folders, length of filenames, etc. etc. etc.
That's why I posted the link to that other thread. The only way to limit the amount the function needs to search through would be to use something like dgorsman's idea of depth-limiting. I.e. how deep you search into nested folders. Or use a list of possible folders through which to search - i.e. add the folder into your Support Folders Search Path and use the findfile function.
Hardcoding paths require changes to code if the path changes. Look at the number of posters who have a LISP they inherited and need to make it work on a new computer, new network location, new AutoCAD version. To my mind changing data requires less knowledge than changing code, so I use a combination of registry values, XML files, and generic search patterns to handle changes with less work and by those who don't understand LISP (like IT 
).
Too true, if you constantly need to search for a file you need to find another way. Either add it to your SFSP, or have a setting which tells you where it is (Registry or some file in acad's setup folders). That's going to be exponentially faster than even limiting the depth of nested search folders.
