I remembered working on a Sun some time ago where a pipe with xargs gave problems with too many arguments - but I might have dreamt it.

If so, then it would be a bug, as that would mean its xargs would not be POSIX compliant. I can't recall ever run into this problem using Solaris (but that doesn't prove anything - my memory isn't perfect). Here's the relevant quote from the POSIX docs:

The generated command line length shall be the sum of the size in byte
+s of the utility name and
each argument treated as strings, including a null byte terminator for
+ each of these strings. The
xargs utility shall limit the command line length such that when the c
+ommand line is invoked,
the combined argument and environment lists (see the exec family of fu
+nctions in the System
Interfaces volume of IEEE Std 1003.1-2001) shall not exceed {ARG_MAX}-
+2 048 bytes. Within
this constraint, if neither the -n nor the -s option is specified, the
+ default command line length
shall be at least {LINE_MAX}.
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Edited by planetscape - replaced pre with code tags