There's no magical "decision" about how many products Zen Cart can handle.
The answer to that question depends on how complex your category depths are, how many attributes are applied to each of your products, and how many sales/specials are active, among other things.
And it also depends to a HUGE extent on the quality of hosting your site is running on.
It's not uncommon to see sites that have over 100,000 products running just fine. Many sites run with lots more than that.
And it's equally not uncommon to see sites with only 100 products performing abysmally because they're hosted on a crappy GoDaddy server.
As for what an overload looks like: it just becomes painfully slow. I'm not sure what you think a "crash and burn" looks like ... I've never seen smoke coming out of my browser, if that's what you're talking about.
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