Max (practical) files per folder on a Windows file share?

It's more dependent on bandwidth and latency (especially latency) than it is on the number of files and scaling in the algorithms being used to enumerate the directory. There is no "magic number", I guess, is what I'm saying.

The SMB protocol is hideous for requiring lots and lots of round trips. That number of files, with double the latency, would be many times more than twice as slow, for example.

You've done the benchmarking by accident for your LAN, your network infrastructure's latency, and your server computer's IO subsystem latency. You've obviously found a "magic number". I'd get that directory pared down until performance gets better. There's no other way!

Evan's right, there is no magic number. It depends on the app and the server. Upgrading to server 2008 will help, and is the first thing I'd do, as long as the client is vista or better as they use SMBv2. I've got shares that have 500,000 files that browse like crap but, since the users only use direct paths provided, work fine. On the same server I've got shares with 100,000 files that users have no issues with.