I suppose that's one way to prevent new players from entering overpopulated servers..

[Reinfeld]

I still think you should be able to create as many characters as you want, up to the limit for your account, on any server you have characters on.

Locking me out of making an alt on a server I main on, when two toons on the same account can't even be logged in at the same time anyways, is stupid.

It probably has to do the with the way they structured their servers or some such, where the server doesn't (can't) check whether you have a character already or not when asking to create one. Whether it would be easy to fix or not I don't know, but it's really annoying.