Outlook can hold approx 65000 items in older versions, unlimited in Ol2003
with a Unicode store. But how much too is too much really depends on the
user and their needs (and tolerance levels). Network traffic will affect the
speed about as much as the server specs.

If they are not using Ol2003 and cached mode, smaller folders will load a
faster, but some people have a hard time managing (and finding things in)
multiple folders. Ol2003's search folders can help speed up finding
frequently used keywords etc and there are 3rd party search utilities that
are fast and work with all versions of outlook.

FWIW, most of my folders are under 5000 but a few have 25,000 items and i
find anything over 10,000 to be painfully slow over a wireless network - but
I'm an impatient person. I find too many folders a PITA and when the choice
is fewer, slower folders or more but faster folders, I grit my teeth and go
with slower because I can often find what i want faster. (I'm using Ol2003
in cached mode, so network speed is not an issue for my mailbox, only for
public folders.)