I am using Fedora Core 6.0 on a Toshiba Laptop with P3 1.4 GHz CPU and 1.2 GB of RAM. I had 13000+ files in a directory on an external FAT32 partition with 50 GB of free space and when i tried to gunzip any of them, gunzip responded
"no space left on device". Then I moved one of the files to a sub-dir and then tried to gunzip it, it worked.
Also I had no problems when working in a dir with 11000+ files.