What perl version are you running? On what Solaris?

What does this program do for you?

#!/usr/bin/perl -w

use strict;
$|=1;

my $limit=20;

for(my $i=0; $i<$limit; ++$i) {
    print "$i\n";
    system("/bin/echo echoing -- $i");
}
[download]

It works fine on the stock 5.005_03 that came with my Solaris 5.8 box. I can even increase $limit to 2000 with no problems.

If that all works fine, all I can think of is that maybe you're using up too many filehandles as part of your other processing? What _else_ are you doing for each file, apart from the system calls?
--
Mike