As the poster said above.it has something to do with the fact that these servers are still physical hardware and can't process infinitely much stuff. that's why you'll still have a character display limit even if you have the most powerful pc on earth. much of the framework of the game is specifically designed for these servers, so just upgrading them doesn't really change anything.
The server code is god awful compared to some older MMOs. If 2.x code is better than 1.x code I hate to think how limiting 1.x servers were.
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