This limit caused us problems yesterday. For some reason, the temporary files weren't getting deleted.

The first clue was that the temp directory contained exactly 65535 .tmp files. The corroborating clue was that the last .tmp file was named "uplFFFF.tmp" - FFFF would be 65535 in hex.

The .NET Framework mentions this limit for the GetTempFileName method, but curiously the corresponding unmanaged GetTempFileName API doesn't (so I've submitted some Community Content to note this).