toomanybooks is right. I can only fit about 250 books on the internal memory--which I consider a lot of books! The reader could start having problems if you try to add too many books to it...there are other posts here from folks who have tried to max out the number of books on their reader.
As I mentioned in another post--one reason to use the Sony software is that it will "pre-paginate" your LRF files, which will make the books open up faster on the reader. (This only affects the first time you open a book on the reader or change a font size.)
dordale