>>>Hmm...maybe you hit on another thing that's involved here: fragmentation. I run Diskeeper daily on both servers and local drives - so I have virtually no fragmentation. That could be another factor here, combined with the folder size - I can certainly see how those two things together might cause problems.
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>>Our net admin said he'll run a defrag, I'll let you know if it had any impact.
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>Good idea - I've seen a few cases where terrible fragmenation had a big performance effect.

Defrag on the server (don't know exactly what tool was used, but it took about 4 hrs) did not have any impact.
It looks that I was wrong about the number of files in dir being a factor, but the files being open on another WS is a factor - see my answer to Thomas message #781623.