I know that, technically, an individual Windows XP directory can hold an immense number of files (over 4.29 billion, according to a quick Google search). However, is there a practical ceiling where too many files in one directory starts having an impact on reads to those files? If so, what factors would exacerbate or help the issue?

I ask because my employer has several hundred XP machines in the field at client sites, and the performance on some of the older ones is getting "sludgy." The machines download and display client-defined images, and my supervisor and I suspect that our slacktastic approach to cache management could be to blame. (Some of the directories have tens of thousands of images in them.) I'm trying to gather evidence to support or contest the theory before spending time on a coding fix.