Not enough disk space error

Operating syatem: Windows2000 Advance Server
Application developed in VC++ (Visual studio 6.0)

Hi
Mine is a multithreaded application that creats files in a folder (File name not compatible with 8.3 format), when no. of
of files is aprox. 15,000+, I start getting "Not enough Disk
Space" message, but I have around 30GB of free space on my drive.
I have observed following
1. I have checked and found that Quota option is disabled for this drive.
2. It hasFAT32 partition.
3. The operating system is installed on other drive which has NTFS partiton.

Please advise
1. What is the cause of the message?
2. Is there a max. no. of files that can be present in a directory?

Thanks
Lakhwinder