Thanks dosborne, that is what I thought - after all what good a file system if you can only store such a small number of files in one directory.
I've tried with FTP, SAMBA and NFS with the same results - I can't get more than 3820 files in that directory yet I can add to a sub-directory in that directory.
It's not so much of a problem to find what I want when I want it - the software does that for me and there is one sub-directory created by the project software which, as I said, I can still add to.
The stupid thing with this is that the 320 I use to back up the 323 has no problems with adding to the same named directory.