Why would having too many outlets on one circuit cause problems?

It's not the outlets themselves which are the problem, it's what might be plugged in to them. The more outlets, the more loads that can be added to the circuit. Having lots of outlets simply increases the opportunity to add loads, and ultimately, to overload the circuit. Overloads, as you may know, can result ultimately in fires with attendant loss of property or even lives. Of course, if only small loads are plugged in to the outlets, and/or if many of the outlets are unused, then there would be no problem -- except possibly for one: you need to make sure your installation is "up to code"; that is, it complies with the laws and regulations that apply to your electrical wiring. In the USA, a good place to start if you have questions about code requirements is http://www.nfpa.org/freecodes/free_access_agreement.asp?id=7008SB This site gives you free access to the 2008 National Electrical Code.