>Yup, I did that, and it created a whole bunch of devices. However, I can't
>seem to use them--after 16 logins, I get the same error, that I'm out of
>ptys. I even rebooted (well, actually, I tried to kill -1 1, and it
>appears to have hung the machine, so I had to whitebutton it.)
>
>Any thoughts?

I'm sorry if this has been brought up before, but have you tried recompiling your kernel with a greater MAXUSERS setting?  
I believe the GENERIC kernel has this value set to 16. 

-Dan